Digital Home, Incorporated (DHI) is a company that sells and installs smart kitchen appliances, such as refrigerators, ovens, and dishwashers. The company is located in Dayton, Ohio. The company owns their office building. The companys bookkeeper is not trained in accounting. He can record simple daily transactions, collect receivables, and pay vendors. Payroll is outsourced to a payroll company. Whenever the bookkeeper encountered a transaction he did not know how to journalize, he added it to a list. Your job is to record those transactions that were not recorded by the bookkeeper. You will also need to prepare some adjusting entries and year-end financial statements.

DHI uses straight-line depreciation (for both financial accounting and its tax return) and depreciates assets to the nearest whole month in use during the year. The company uses the perpetual LIFO inventory method with lower of cost or net realizable value applied to individual items. Purchases and sales are recorded using the gross method. Adjustments are only recorded at the end of the fiscal year unless otherwise noted.

DHI has 300,000 shares of $8.00 par value common stock authorized. The corporation uses the cost method of accounting for treasury stock. DHI prepares all financial statements in accordance with GAAP. DHIs incremental borrowing rate is 7%. The companys common stock was selling for $25 per share throughout the entire last quarter of 2023.

You will find the 12/31/23 preliminary trial balance for DHI on the last page of this assignment. You can assume the amounts on the trial balance are correct so far unless you are given information to the contrary. The list of transactions below needs your attention. Unless you are told otherwise, assume the information in these transactions has not been recorded. You will also find the post-closing trial balance for 2022 on the last page. DHIs effective tax rate in 2022 was 20%. You can assume the Income Tax Expense amount on the 12/31/23 preliminary trial balance is correct for 2023 even with the entries and adjustments you will make.

For simplicity, all operating expenses for the current year are shown in one account entitled Operating Expenses. But, when you complete your entries, use specific account titles for any operating expenses you need to record (such as Salaries Expense or Insurance Expense). However, if the accounts you add are Operating Expenses, you may combine them into the amount reported as Operating Expenses on the income statement.

11. DHI declared and paid the regular dividend on its preferred stock in December 2023. DHI's preferred stock is convertible, cumulative preferred stock. There are no dividends in arrears. Each share of preferred stock can be converted into 4 shares of common stock. To date, none of the preferred stock has been converted. 12. On June 30, 2023, DHI purchased stock of Folton Security Systems. DHI wanted to establish a relationship with this company because Folton sells and installs smart home security systems. DHI purchased 1,000 shares of Folton's common stock for $16 per share. Folton has issued a total of 3,000 shares of common stock. At year end, the Folton stock was selling for $20 per share. Folton's net income for 2023 was $90,000. DHI received a $700 dividend from Folton in 2023. DHI intends to hold on to this stock indefinitely. 13. January 1, 2023, DHI finalized a lease for some much-needed equipment. The 3-year lease calls for annual payments of $23,000. At the end of the lease, DHI will own the equipment. The useful life of the equipment is 7 years and the expected salvage value at that time is $1,000. DHI paid the first lease payment when the lease was signed on 1/1/2023. The next lease payment is due 1/1/2024. The implicit rate on the lease is 6%. 14. DHI borrowed $50,000 from First National Bank on December 1 . This is a 4 -year installment loan with monthly payments. The interest rate on the loan is 7%. The first payment is due on January 1, 2024. Make all entries necessary for this loan for 2023. 15. The Note Payable already on DHI 's books represents a non-interesting bearing $250,000 note that was signed 1/1/2020 and is payable on 12/31/2024. Record any entries needed related to the note for 2023 . 16. Record adjusting entries based on the following information: a. Depreciation on the building for 2023 is $4,500. b. Additional depreciation to be recorded on equipment for 2023 is $1,500. c. A physical inventory count shows that $91,800 of inventory is still on hand