SMC, Inc.

Balance Sheet December 31, 2017

Assets Cash .........................................................................................................$34,500

Accounts receivable................................................................................$25,000

Inventory ..................................................................................................$10,000

Supplies ................................................................................................... $200

Total assets..............................................................................................$69,700

Liabilities:

Accounts payable ............................................................................. $12,000

Salaries payable ............................................................................... $1000

Income taxes payable ......................................................................$3,675

Total liabilities..........................................................................................$16,675

Stockholdersequity:

Capital stock (10,000 shares outstanding).................................... $25,000

Retained earnings ............................................................................ $28,025

Total stockholders equity .......................................................................$53,025

Total liabilities and stockholders equity................................................ $69,700

Liabilities and Stockholders Equity

SMC, Inc. Income Statement

FortheYearEnded

December31,2017

Sales revenue.......................................................................................... $110,000

Rent revenue........................................................................................... $1000

Total revenues......................................................................................... $111,000

Less cost of goodssold........................................................................... $60,000

Gross Profit...........................................................................................$51,000

Less operating expenses:

Supplies expense............................................................................. $400

Salaries expense..............................................................................$22,000

Insurance expense................................................................... $4,100 $26,500

Income beforetaxes................................................................................ $24,500

Less incometaxes...................................................................................$3,675

Netincome............................................................................................... $20,825

Earnings per share ($20,825 / 10,000shares) $2.08

SMC, Inc. Post-Closing Trial Balance December 31, 2017

Cash .........................................................................................................$34,500(DEBIT)

Accounts Receivable............................................................................... $25,000(DEBIT)

Inventory .................................................................................................. $10,000(DEBIT)

Supplies ................................................................................................... $200(DEBIT)

Accounts Payable .................................................................................... $12,000(CREDIT)

Salaries Payable ...................................................................................... $1000(CREDIT)

Income TaxesPayable.............................................................................$3675(CREDIT)

Capital Stock............................................................................................$25,000(CREDIT)

Retained Earnings ...................................................................................$28,025(CREDIT)

Totals........................................................................................................$69,700

You are also given the following information that summarizes the business activity for the current year,2018:

Issued 10,000 additional shares of common stock for $35,000 cash on January 1st.

Borrowed $20,000 on March 1, 2018, from Downtown Bank as a long-term loan. The interest rate

onthe loanis4%andInterestfortheyearispayableonJanuary1,2019.

Paid $9,000 cash on April1 to lease a building for one year.

Received $6,000 on May 1 from a tenant for one years rent.

Paid $2,400 on June 1 for a one-year insurance policy.

Purchased $1,530 of supplies for cash on June 15th.

Purchased inventory for $100,000 on account on July 1.

August 1, sold inventory for $185,000 on account; cost of the merchandise sold was $107,000.

Collected $120,000 cash from customers accounts receivable on August 20th.

September1,Paid $75,000cashforinventoriespurchasedearlierduringtheyear.

September 20th, paid $34,000 for sales reps salaries, including $1,000 owed at the beginning of 2018.

Dividends for $7,500 were paid on October 20th.

The income taxes payable at the beginning of 2018 were paid on November 15th.

For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenues

are initially recorded as liabilities.

At year-end, $600 worth of supplies are on hand.

At year-end, an additional $7,100 of sales salaries are owed, but have not yet been paid.

Prepare an adjusting entry to recognize the taxes owed for 2018. The corporate tax rate is 21% of the

income before income taxes.

*******The following are the check figures: The total for the adjusted trial balance is $350,502 and the Income Before Income Tax Amount is $31,953. These amounts are rounded to the nearest dollar.********

You are asked to do the following on the excel spreadsheet provided in Blackboard under the Computer Project Tab:

1.)Set up T-accounts and enter the beginning balances from the December 31, 2017, post-closing trial balance for SMC. Post all current year journal entries to the T- accounts.

2.)Journalize and post any necessary adjusting entries at the end of 2018. (Hint: Items b, c, d, e, o, p, and q require adjustment.)

3.)Journalize and post-closing entries for 2018 and prepare a post-closing trial balance.

4.)After the adjusting entries are posted, prepare an adjusted trial balance, an income statement, statement of retained earnings and a balance sheet for 2018. The format of your statements should mirror those prepared by the company in 2017.

5.)Compute the Current ratio and Debt to Total Asset Ratio for 2017 and 2018