PRACTICE PROBLEM.

After closing its books for the year ended December 31, 2018, Homestart Inc. had the following account balances

Cash	$ 960,000
Accounts Receivable	$ 348,000
Inventory	$ 436,000
Prepaid rent - office building	$ 16,000
Equipment	$ 650,000
Accumulated Amortization - Equipment	$ 70,000
Unearned/Deferred Service Revenue	$ 550,000
Accounts payable	$ 279,000
Salaries and wages payable	$ 35,000
Common shares	$ 496,000
Retained Earnings	$ 980,000

During the year ended December 31, 2019, the following transactions took place

1. Sales totaling $986,000 were made on account
2. The company purchased $158,000 of inventory on account
3. Salaries and wages of $259,000 were paid during the year
4. Collections from customer for sales on account were $826,000
5. 10,000 preferred shares were issued/sold for $100 per share
6. $63,000 was paid for utilities
7. On February 1, 2019, Homestart purchased the office building they had been renting for $900,000. 80% of the purchase price related to the building and 20% to the land.
8. On April 1, 2019, $10,800 was paid for insurance on the land and building.
9. Payments for inventory purchased on account totaled $397,000
10. $490,000 of unearned/deferred revenue was earned during the year
11. On September 1, 2019 Homestart LOANED $300,000 to Acer Company. Acer company signed a 7-month note payable to Homestart.
12. Dividends of $50,000 were declared and paid on common shares
13. Dividends of $20,000 were declared on preferred shares but wont be paid to shareholders until January 6, 2020.

Information for adjusting entries

14. At December 31, 2019 $259,000 of inventory was still on hand.
15. The insurance was for the period April 1, 2019-March 31, 2020.
16. $29,000 of Salaries and wages were owed to employees at December 31, 2019.
17. The building has an estimated useful life of 20 years and a residual value of $120,000. Homestart uses the straight-line method to amortize all of its capital assets.
18. The equipment has a useful life of 10 years and no residual value.
19. The note from Acer Company carries an annual interest rate of 6%. Both the principal (face value) and the interest on the note will be received when the note matures.
20. The Balance in the prepaid rent office building account at December 31, 2018 relates to rent for January 2019.

Required: NOTE: ROUND ALL NUMBERS TO THE NEAREST DOLLAR INCLUDING AMOUNTS FOR JOURNAL ENTRIES AND ADJUSTING JOURNAL ENTRIES (DO NOT USE CENTS)

1. Prepare Journal entries for transactions 1 through 13. If necessary, create new accounts.
2. Prepare adjusting journal entries for transactions 14-21. If necessary, create new accounts.
3. Set up T accounts, enter the beginning balances from 2018, post the 2019 entries and calculate the balance in each account.
4. Prepare a trial balance.
5. Prepare a statement of income for 2019.
6. Prepare closing entries, post them to the T accounts and calculate the final balance in each account.
7. Prepare a statement of financial position for 2019.