LZH Warehouse is a retail company that purchase and re-sell various commodities. The company began operations in January of 2014. Presented below are descriptions of several events, conditions, and transactions of LZH Warehouse in August 2014. The following sub-classifications are the only accounts used for the financial statements:

Financial Statement Sub-classifications

Balance Sheet Current assets; Property, plant and equipment; Intangible assets; Current liabilities; Long-term liabilities; Contributed capital; Retained earnings

Income Statement Part of operating income, financial revenues and expenses, other gains/losses, extraordinary gains/losses

Statement of Cash Flows Operating activities, Investing activities, Financing activities

Income taxes are 30% of net income before taxes. Transactions in August of 2014 were as follows:

8/1 LZH raised capital (cash) by issuing 5,000 shares of stock for $100,000.

8/1 LZH prepaid a five-month insurance policy in the amount of $5,000.

8/1 LZH borrowed $90,000 cash from a local bank and signed a note. The note requires the principal plus interest at 10% to be paid on July 31, 2015.

8/6 LZH acquired a building to use as a retail store site for $50,000 cash.

8/10 LZH purchased inventory worth $21,000 on account (credit).

8/14 LZH sold merchandise on account (credit) in the amount of $45,000. The cost of the merchandise was $9,000. Hint: there are two events here.

8/15 A customer was injured using the product sold by LZH and sued LZH on August 15. Although the suit has not been decided, LZH is clearly at fault, and expects to have to pay the full amount $4,500, of the judgment early next year. The conservatism principle requires this be recognized in the financial statements.

8/31 Prepare any necessary adjusting entries for LZH relating to its insurance account.

8/31 Prepare any necessary adjusting entries for LZH relating to its note.

8/31 Depreciation expenses on building for the month of August is $1,200.

8/31 Obligations to employees for wages in the amount of $3,500 had not been paid by the end of August.

8/31 During 2014, LZH paid dividends in the amount of $5,000 to stock holders

8/31 Assume an income tax rate of 30%, accrue income tax due for the month of August (you will need to know operating income for this adjustment).

8/31 Close all income and expenses accounts to Income Summary. Close the Income Summary to Retained Earnings.

Part I. Prepare journal entries necessary to record transactions and activities during August. Include a brief explanation for each entry. Then post your entries to the General Ledger Accounts and Subsidiary Ledger Accounts (You may find that you will need to post as you write the entries).