Comprehensive Accounting Cycle Review 10

Blue Spruce Corp.s balance sheet at December 31, 2016, is presented below.

BLUE SPRUCE CORP. Balance Sheet December 31, 2016
Cash		$30,900		Accounts payable		$13,100
Inventory		30,300		Interest payable		2,500
Prepaid insurance		5,900		Bonds payable		50,000
Equipment		39,800		Common stock		26,300
				Retained earnings		$15,000
		$106,900				$106,900

During 2017, the following transactions occurred. Blue Spruce uses a perpetual inventory system.

1.		Blue Spruce paid $2,500 interest on the bonds on January 1, 2017.
2.		Blue Spruce purchased $243,800 of inventory on account.
3.		Blue Spruce sold for $490,000 cash inventory which cost $262,000. Blue Spruce also collected $29,400 sales taxes.
4.		Blue Spruce paid $232,000 on accounts payable.
5.		Blue Spruce paid $2,500 interest on the bonds on July 1, 2017.
6.		The prepaid insurance ($5,900) expired on July 31.
7.		On August 1, Blue Spruce paid $10,200 for insurance coverage from August 1, 2017, through July 31, 2018.
8.		Blue Spruce paid $16,000 sales taxes to the state.
9.		Paid other operating expenses, $88,000.
10.		Redeemed the bonds on December 31, 2017, by paying $48,400 plus $2,500 interest.
11.		Issued $90,000 of 8% bonds on December 31, 2017, at 103. The bonds pay interest every June 30 and December 31.

Adjustment data:

12.		Recorded the insurance expired from item 7.
13.		The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $3,100 salvage value.
14.		The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

(SCREENSHOTS)

Comprehensive Accounting Cycle Review 10 Blue Spruce Corp.'s balance sheet at December 31, 2016, is presented below. BLUE SPRUCE CORP. Balance Sheet December 31, 2016 $13,100 Cash $30,900 Accounts payable Interest payable 30,300 Inventory 2,500 Bonds payable 50,000 Prepaid insurance 5,900 Equipment 39,800 Common stock 26,300 Retained earnings $15,000 $106,900 $106,900 During 2017, the following transactions occurred. Blue Spruce uses a perpetual inventory system Blue Spruce paid $2,500 interest on the bonds on January 1, 2017. 1. 2. Blue Spruce purchased $243,800 of inventory on account. 3. Blue Spruce sold for $490,000 cash inventory which cost $262,000. Blue Spruce also collected $29,400 sales taxes. Blue Spruce paid $232,000 on accounts payable Blue Spruce paid $2,500 interest on the bonds on July 1, 2017 4. 5. The prepaid insurance ($5,900) expired on July 31 On August 1, Blue Spruce paid $10,200 for insurance coverage from August 1, 2017, through July 31, 2018 6. 7 Blue Spruce paid $16,000 sales taxes to the state. 8. Paid other operating expenses, $88,000 Redeemed the bonds on December 31, 2017, by paying $48,400 plus $2,500 interest 9. 10 Issued $90,000 of 8% bonds on December 31, 2017, at 103. The bonds pay interest every June 30 and December 31 11 Adjustment data: Recorded the insurance expired from item 7. 12. The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $3,100 salvage value 13. 14 The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.) Prepare journal entries for the transactions listed above and adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1 2. 3. (To record sales revenue.) (To record cost of goods sold.) 5. 6. 7. 8. 9. 10. (To record interest expense.) (To record retirement of bonds.) 11 12. 13. 14