Course Project FINANCIAL REPORTING I Asa recently hired accountant for a small business, SMC, Inc., you are provided with last year's balance sheet, income statement, and post-closing trial balance to familiarize yourself with the business. SMC, Inc. Balance Sheet December 31, 2020 Assets Cash Accounts receivable Inventory Supplies Total assets. $44,500 28,000 15,000 700 $88.200 Liabilities and Stockholders' Equity $14,000 2,500 3.275 Liabilities: Accounts payable Salaries payable Income taxes payable Total liabilities. Stockholders'equlty: Capital stock (10,000 shares outstanding). Retained earnings Total stockholders' equity Total liabilities and stockholders' equity. $19,775 $35,000 33.425 68.425 $88.200 SMC, Inc. Income Statement For the Year Ended December 31, 2020 $110.000 1.000 $111,000 60.000 $ 51.000 $ Sales revenue Rent revenue Total revenues. Less cost of goods sold. Gross profit Less operating expenses: Supplies expense Salaries expense Miscellaneous expense. Income beforetaxes. Less income taxes.. Net income Earnings per share ( $20,825 / 10,000shares) 400 22,000 4.100 26.500 $ 24,500 3.675 $ 20.825 $ 2.08 SMC, Inc. Post-Closing Trial Balance December 31, 2020 Debits Credits $44,500 28,000 15,000 700 Cash Accounts Receivable. Inventory Supplies Accounts Payable Salaries Payable Income Taxes Payable. Common Stock Retained Earnings Totals, $14.000 2,500 3,275 35.000 33.425 $88.200 $88.200 You are also given the following information that summarizes the business activity for the current year, 2021 e a. Issued 10,000 additional sharesof common stock for $45,000 cash on January 1st. b. Borrowed $25,000 on March 1, 2021, from Downtown Bankasa long-term loan. The interest rate on the loan is 5% and Interest for the year is payable on January 1, 2022 C. Paid $18,000 cash on April1 to lease a building for one year, d. Received $7,500 on May 1 from a tenant for one year's rent Paid $4,200 on June 1 for a one-year insurance policy. f. Purchased $3,500 of supplies for cash on June 15th. Purchased inventory for $125,000 on account on July 1. h August 1, sold inventory for $185,000 on account; cost of the merchandise sold was $120,000. Collected $130,000 cash from customers'accounts receivableon August 20th. September 1, Paid $95,000 cash for inventories purchased earlier during the year. k. September 20 paid $34,000 for sales reps' salaries, including $2,500 owed at the beginningof 2021. Dividendsfor $9,500 were paid on October 20th. m. The income taxes payable for the year of 2020 were paid on November 15th. For adjusting entries, all prepaid expensesareinitially recorded asassets, and all unearned revenues are initially recorded as liabilities (this is justinformational). At year-end, $1,050 worth of supplies are on hand. p. At year-end, an additional $7,200 of sales salaries are owed, but have not yet been paid. q Prepare an adjusting entry to recognize the taxes owed for 2021. The corporate tax rate is 21% of the income before income taxes. i i. 1. n. o. 2 3 You are asked to do the following on an excel spreadsheet: 1. Journalize the transactions for the current year, 2021, using the chart of accounts listed on the excel spreadsheet provided for project Set up T-accounts and enter the beginning balances from the December 31, 2020, post-closing trial balance for SMC. Post all current year journal entries to the T-accounts. Journalize and post any necessary adjusting entries at the end of 2021. (Hint Items b, c, d, e, o, p, and a require adjustment) After the adjusting entries are posted, prepare an adjusted trial balance, an income statement, statement of retained earnings and a balance sheet for 2021. The format of your statements should mirror those prepared by the company in 2020. 5. Journalize and post-closing entries for 2021 and prepare a post-closing trial balance. Compute the Current Ratio and Debt to Total Equity Ratio for 2020 and 2021 7. Interpretive Question: What is your overall assessment of the financial health of SMC, Inc.? Use the Word Document provided to answer the question. 4 6