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Kingbird Corporations balance sheet at December 31, 2024, is presented below. Kingbird Corporation Balance Sheet December 31, 2024 Cash $60,000 Accounts payable $27,500 Inventory 61,500
Kingbird Corporations balance sheet at December 31, 2024, is presented below.
Kingbird Corporation Balance Sheet December 31, 2024 | ||||||
---|---|---|---|---|---|---|
Cash | $60,000 | Accounts payable | $27,500 | |||
Inventory | 61,500 | Interest payable | 5,000 | |||
Prepaid insurance | 11,200 | Bonds payable | 100,000 | |||
Equipment | 76,000 | Common stock | 50,000 | |||
Retained earnings | $26,200 | |||||
$208,700 | $208,700 |
During 2025, the following transactions occurred. Kingbird uses a perpetual inventory system.
1. | Kingbird paid $5,000 interest on the bonds on January 1, 2025. | |
2. | Kingbird purchased $482,200 of inventory on account. | |
3. | Kingbird sold for $960,000 cash inventory which cost $528,000. Kingbird also collected $57,600 sales taxes. | |
4. | Kingbird paid $460,000 on accounts payable. | |
5. | Kingbird paid $5,000 interest on the bonds on July 1, 2025. | |
6. | The prepaid insurance ($11,200) expired on July 31. | |
7. | On August 1, Kingbird paid $20,400 for insurance coverage from August 1, 2025, through July 31, 2026. | |
8. | Kingbird paid $34,000 sales taxes to the state. | |
9. | Paid other operating expenses, $182,000. | |
10. | Redeemed the bonds on December 31, 2025, by paying $96,000 plus $5,000 interest. | |
11. | Issued $180,000 of 8%, 10-year bonds on December 31, 2025, at 103. The bonds pay interest every June 30 and December 31. |
Adjustment data:
1. | Recorded the insurance expired from item 7. | |
2. | The equipment was acquired on December 31, 2024, and will be depreciated on a straight-line basis over 5 years with a $6,100 salvage value. | |
3. | The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.) |
Prepare journal entries for the transactions listed above and adjusting entries
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