Day & Knight Computer Connection was incorporated on January 1st. The business maintains a retail personal computer replacement parts store, and also provides a full range of services, including computer diagnostic services, virus removal, hardware replacement, software installation and upgrades, and optimization services.

The following transactions occurred during the first twelve months of operations:

January 1st Common stock is issued in exchange for cash in the amount of 325,000

February 8th The company purchases and pays for 400 units of computer replacement parts at a price of $35 per unit 14,000

March 1st The company pays cash for a one-year insurance policyin the amount of 10,375

March 31st Rent on a retail space for 12 months is paid in the amount of 10,125

April 1st Diagnostic tools and testing equipment with a useful life of 2 years is purchased for cash in the amount of 24,360

April 10th PC tuning supplies purchased on account in the amount of 2,450

May 15th The company purchases and pays for another 200 units of computer replacement parts at a price of $38 per unit .....7,600

May 30th PC repair services are performed on account in the amount of 10,835

June 1st The company pays for advertisements to be run for the next 12 months in the amount of 1,440

June 30th The company issues a 5-year bond with a face value of $100,000 and a stated annual rate of 8%. Interest is due on June 30th each year. The market rate is 6% on the date of issuance 100,000

July 25th Software installation & upgrade services are performed on account in the amount of 10,975

July 31st 100 units of computer replacement parts are sold for $75 per unit with terms 2/10, n/30. The sale is recorded using the gross method in the amount of (see note c for cost flow assumptions) 7,500

August 2nd Hardware replacement services are provided on account in the amount of 7,820

August 6th The company receives full payment from the customer for the July 31st sale 7,350

September 15th Virus removal services are performed on account in the amount of 2,695

September 29th Customer payments are received for services previously provided in the amount of 1,250

October 13th 126 units of computer replacement parts are sold for $75 per unit with terms 2/10, n/30. The sale is recorded using the gross method in the amount of 9,450

October 29th The company receives payment for half of the October 13th sale 4,725

November 1st Equipment originally purchased on April 1st for $3,000 is sold for $1,500 cash

November 15th A bookkeeper is hired to help the company with daily accounting taxes and annual tax preparation

December 15th The bookkeeper is paid $4,500 for the previous month's services 4,500

Additional information:

a. PC tuning supplies on hand at the end of the month are as follows: 1,470

b. The year-end balance reported at the end of the year for the Allowance for Doubtful Accounts is estimated as 2.5% of outstanding receivables at the end of the year

c. The Company uses a perpetual inventory system and accounts for costs using the LIFO cost flow assumption. On December 31st, a count of ending inventory reveals that there are 374 units of computer replacement parts on hand.

d. All revenue is recorded in the "Sales Revenue" account and reported net of cash discounts on the income statement.

e. The effective interest method is used to amortize bond premiums and discounts

f. Adjustments are made at the end of the year for prepaid insurance, rent, advertising, depreciation, and interest expense.

g. The bookkeeper is paid a salary of $4,500 on the 15th of every month.

h. The company declared dividends of $400 for the year

i. Assume selling expenses include advertising and supplies expense. All other expenses, other than depreciation and interest expense, are considered general & administrative.

REQUIRED:

1.Journal entries for all the transactions starting from January

2. Post all entries to the general ledger accounts.

3. Unadjusted trial balance

4. Necessary adjusting journal entries as of January 31

5. Adjusted trial balance on December 31st.

6.Prepare closing entries, post to the general ledger, and carry-forward balances to January 1st of the next year.

7.Prepare the following financial statements on December 31st by ignoring the income taxes:

a.Income Statement

b.Statement of Stockholders' Equity

c.Balance Sheet

d.Statement of Cash Flows