Question 5

Monty Corp.s balance sheet at December 31, 2016, is presented below.

MONTY CORP. Balance Sheet December 31, 2016 Cash $33,500 Accounts payable $13,800 Inventory 30,050 Interest payable 2,425 Prepaid insurance 5,600 Bonds payable 48,500 Equipment 39,000 Common stock 25,400 Retained earnings $18,025 $108,150 $108,150

During 2017, the following transactions occurred. Monty uses a perpetual inventory system.

1. Monty paid $2,425 interest on the bonds on January 1, 2017. 2. Monty purchased $244,300 of inventory on account. 3. Monty sold for $486,000 cash inventory which cost $268,000. Monty also collected $29,160 sales taxes. 4. Monty paid $238,000 on accounts payable. 5. Monty paid $2,425 interest on the bonds on July 1, 2017. 6. The prepaid insurance ($5,600) expired on July 31. 7. On August 1, Monty paid $10,080 for insurance coverage from August 1, 2017, through July 31, 2018. 8. Monty paid $17,000 sales taxes to the state. 9. Paid other operating expenses, $88,000. 10. Redeemed the bonds on December 31, 2017, by paying $46,600 plus $2,425 interest. 11. Issued $87,000 of 8% bonds on December 31, 2017, at 103. The bonds pay interest every June 30 and December 31.

Adjustment data:

12. Recorded the insurance expired from item 7. 13. The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $2,800 salvage value. 14. 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. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No. Account Titles and Explanation Debit Credit 1. enter an account title to record interest paid on the bonds on January 1, 2017 enter a debit amount enter a credit amount enter an account title to record interest paid on the bonds on January 1, 2017 enter a debit amount enter a credit amount 2. enter an account title to record the inventory purchased on account enter a debit amount enter a credit amount enter an account title to record the inventory purchased on account enter a debit amount enter a credit amount 3. enter an account title to record sales revenue enter a debit amount enter a credit amount enter an account title to record sales revenue enter a debit amount enter a credit amount enter an account title to record sales revenue enter a debit amount enter a credit amount (To record sales revenue.) enter an account title to record cost of goods sold enter a debit amount enter a credit amount enter an account title to record cost of goods sold enter a debit amount enter a credit amount (To record cost of goods sold.) 4. enter an account title to record an amount paid on accounts payable enter a debit amount enter a credit amount enter an account title to record an amount paid on accounts payable enter a debit amount enter a credit amount 5. enter an account title to record interest paid on the bonds on July 1, 2017 enter a debit amount enter a credit amount enter an account title to record interest paid on the bonds on July 1, 2017 enter a debit amount enter a credit amount 6. enter an account title to record prepaid insurance expired on July 31 enter a debit amount enter a credit amount enter an account title to record prepaid insurance expired on July 31 enter a debit amount enter a credit amount 7. enter an account title to record payment for insurance coverage from August 1, 2017, through July 31, 2018 enter a debit amount enter a credit amount enter an account title to record payment for insurance coverage from August 1, 2017, through July 31, 2018 enter a debit amount enter a credit amount 8. enter an account title to record sales taxes paid to the state enter a debit amount enter a credit amount enter an account title to record sales taxes paid to the state enter a debit amount enter a credit amount 9. enter an account title to record payment for other operating expenses enter a debit amount enter a credit amount enter an account title to record payment for other operating expenses enter a debit amount enter a credit amount 10. enter an account title to record interest expense enter a debit amount enter a credit amount enter an account title to record interest expense enter a debit amount enter a credit amount (To record interest expense.) enter an account title to record retirement of bonds on December 31, 2017 enter a debit amount enter a credit amount enter an account title to record retirement of bonds on December 31, 2017 enter a debit amount enter a credit amount enter an account title to record retirement of bonds on December 31, 2017 enter a debit amount enter a credit amount (To record retirement of bonds.) 11. enter an account title to record the issuance of bonds on December 31, 2017, at 103. The bonds pay interest every June 31 and December 31 enter a debit amount enter a credit amount enter an account title to record the issuance of bonds on December 31, 2017, at 103. The bonds pay interest every June 30 and December 31 enter a debit amount enter a credit amount enter an account title to record the issuance of bonds on December 31, 2017, at 103. The bonds pay interest every June 30 and December 31 enter a debit amount enter a credit amount 12. enter an account title to record the insurance expired from item 7 enter a debit amount enter a credit amount enter an account title to record the insurance expired from item 7 enter a debit amount enter a credit amount 13. enter an account title to record the equipment acquired on December 31, 2016 enter a debit amount enter a credit amount enter an account title to record the equipment acquired on December 31, 2016 enter a debit amount enter a credit amount 14. enter an account title to record the income tax rate enter a debit amount enter a credit amount enter an account title to record the income tax rate enter a debit amount enter a credit amount

Prepare an adjusted trial balance at December 31, 2017.

MONTY CORP. Trial Balance choose the accounting period For the Year Ending December 31, 2017 December 31, 2017 For the Month Ending December 31, 2017 Debit Credit enter an account title $enter a debit balance $enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance enter an account title enter a debit balance enter a credit balance Totals $enter a total for the debit column $enter a total for the credit column