P3-2 Miloslav began a magazine delivery service, which he named Miloslavs Magazines, on January 1, 2001. The following transactions occurred during 2001:

a. Sold stock for $3,000 cash on January 1.

b. Borrowed $20,000 cash on April 1. The interest rate on the loan is 12% annually, and the interest is due each December 31, until the note is repaid.

c. Bought a bicycle for $1,000 cash on January 1. The bicycle has an estimated life of five years, and no salvage value.

d. Bought 10,000 magazines for $2.00 cash each on April 5.

e. Sold magazines at various times for a total of $22,500. All sales were on account.

f. Collected $20,500 from customers.

g. Paid himself a salary of $3,000 cash.

h. Paid the stockholders a dividend of $50 on the $3,000 in stock.

i. Paid the interest on the loan in b.

j. On December 31, Miloslav determined by a physical count that there were 1,000 magazines left in the storage bin at the warehouse.

Required

Prepare journal entries for the above transactions. Post the journal entries to appropriate T-accounts. Prepare any necessary adjusting and closing entries needed at December 31, 2001. Prepare a December 31, 2001 balance sheet and an income statement for the year ended December 31, 2001.