I. The ledger for Saturn Stores had the following account balances as of January 1, 20x2.

Cash $230,000

Accounts receivable 350,000

Inventory 300,000

Prepaid rent 60,000

Equipment 450,000

Accounts payable 130,000

Salaries payable 10,000

Dividends payable 15,000

Capital stock 850,000

Retained earnings 385,000

The company had the following transactions in 20x2.

1. Sales on account, $2,500,000.

2. Collections from customers, on account, $2,400,000.

3. Purchases of merchandise, on account, $1,600,000.

4. Payments to suppliers of merchandise, on account, $1,525,000.

5. Cost of merchandise sold, $1,550,000.

6. Salaries earned by employees, $380,000.

7. Salaries paid to employees, $385,000.

8. Cost of other services purchased on account and used, $130,000.

9. Payments to suppliers of other services purchased on account, $125,000.

10. Payments for the right to use the company's premises during the period from July 1, 20x2 to June 30, 20x3, $132,000.

11. Rental costs applicable to 20x2, to be determined. (Note that rent for the first 6 months of 20x2 ($60,000) was prepaid last year as shown in the account balances table above.)

12. Equipment purchased for cash, $80,000.

13. Depreciation on equipment, $88,000.

14. Dividends declared, $80,000.

15. Dividends paid, $75,000.

a. Set up T-accounts and enter the opening balances. Be sure to enter each balance on the correct side of its account.

b. Prepare journal entries for Saturn Stores' transactions in 20x2, using the account titles provided above and any new accounts you find necessary.

c. Post these entries to the appropriate T-accounts.

d. Prepare an income statement for the year 20x2 and a balance sheet as of December 31, 20x2.

II. Freemont hardware Store, Inc., had the following balance sheet on March 31, 20x1:

FREEMONT HARDWARE STORE, INC.

Balance Sheet

March 31, 20x1

Assets Liabilities & Owners' Equity

Current assets: Current liabilities:

Cash $ 55,000 Salaries payable $ 1,000

Accounts receivable 120,500 Accounts payable 93,000

Merchandise inventory 108,500

Total current assets 284,000 Total current liabilities 94,000

Plant assets:

Land $ 20,000 Owners' equity:

Building 110,000 Capital stock $260,000

Equipment 29,000 Retained earnings 89,000

Total 159,000 Total owners' equity 349,000

Total assets $443,000 Total Liabilities & owners' equity $443,000

The following items summarize the company's transactions for the month of April:

1. Purchased merchandise on account at a total cost of $67,500 and placed it in inventory.

2. Purchased an electric warehouse truck on account at a cost of $8,000.

3. Sold merchandise on account for $91,000; cost, $57,500.

4. Collected $75,000 on accounts receivable.

5. Received invoices covering telephone service, electricity, and other services bought and used during April, $5,700 (credit Accounts Payable).

6. Recorded employees' salaries for the month of April, $14,000.

7. Rented a small storeroom in a nearby building for 12 months, beginning April 1, 20x1, at a monthly rental of $550. Paid six months' rent in cash.

8. Paid $91,700 on accounts payable and $14,000 in salaries to employees.

9. Calculated depreciation for the month of April: equipment, $800; building, $250.

10. The board of directors declared a dividend in the amount of $2,500 to be paid to shareholders in cash on May 15, 20x1.

a. Set up T-accounts for the items shown on the balance sheet and enter the March 31 balances.

b. Analyze each transaction and prepare journal entries using the account titles you adopted in (a) plus any others required by your analyses.

c. Set up additional T-accounts, as required, and post your entries from (b).

d. Determine the April 30 balance in each account. Using these balances, prepare an income statement for the month of April and a balance sheet as of April 30. (Ignore income taxes.)