ENTRIES:

1. Began operations on 1/1/2012 with issuance of 10,000 shares at $15 each

2. Acquired building for $80,000 and equipment for $40,000. The firm pays $60,000 cash and finances the rest with a $60,000 10% mortgage. Interest is due Jan 1 of each year

3. On 1/2/2012, they purchase a 2-year insurance policy for $1,200 in cash

4. Acquired merchandise from vendors on account for $320,000

5. Pays suppliers for merchandise on account with $270,000 in cash

6. Makes sales of $510,000 of which $80,000 is for cash and $430,000 on account

7. Collects $360,000 from customers who purchased on account

8. Pays $80,000 cash for salaries

9. Pays $1,300 cash for utilities

10. Receives $600 cash advance for merchandise to be delivered in future periods

11. On 11/1/12, they receive a $1,000 9% note from a customer to settle an accounts receivable

12. On 12/1/12, they rent out a portion of their building for 3 months. The rent is $900 for all periods and is received in full at the beginning of the contract

13. Records depreciation of $4,000 for the building and $5,000 for the equipment

14. Finds that cost of goods sold for the year is $180,000

15. Salary expense for last 4 days of 2012 are $800, but this will be paid in 2013

16. They declare a dividend of $25,000 to be paid in 2013

17. Adjust insurance expense that has been used (see entry 3)

18. Record interest expense for the year (see entry 2) assume not paid in cash

19. Record interest income for the year (see entry 11) assume not received in cash

20. Adjust rent income during the year (see entry 12)

Record all journal entries and post to t-accounts. Prepare an income statement and a balance sheet (dont forget the retained earnings amount on the balance sheet!). Assume this is the companys first year in existence