Strods Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses.

STRODS COMPANY

Comparative Balance Sheets

December 31

Current Year Prior Year

Assets

Cash $ 61,400 $ 71,600

Accounts receivable 79,000 61,000

Inventory 281,000 257,000

Prepaid expenses 2,700 3,400

Total current assets 424,100 393,000

Equipment 223,000 153,000

Accum. depreciationEquipment (50,000 ) (65,000 )

Total assets $ 597,100 $ 481,000

Liabilities and Equity Accounts payable $ 56,100 $ 121,000

Short-term notes payable 18,000 11,000

Total current liabilities 74,100 132,000

Long-term notes payable 85,000 64,000

Total liabilities 159,100 196,000

Equity Common stock, $5 par value 170,000 150,000

Paid-in capital in excess of par, common stock 60,000 0

Retained earnings 208,000 135,000

Total liabilities and equity $ 597,100 $ 481,000

STRODS COMPANY

Income Statement

For Current Year

Ended December 31

Sales $ 783,000

Cost of goods sold 330,000

Gross profit 453,000

Operating expenses

Depreciation expense $ 22,000

Other expenses 177,000

199,000

Other gains (losses)

Loss on sale of equipment (6,600 )

Income before taxes 247,400

Income taxes expense 43,000

Net income $ 204,400

Additional Information on Current Year Transactions:

a. The loss on the cash sale of equipment was $6,600 (details in b).

b. Sold equipment costing $56,000, with accumulated depreciation of $37,000, for $12,400 cash.

c. Purchased equipment costing $126,000 by paying $36,000 cash and signing a long-term note payable for the balance.

d. Borrowed $7,000 cash by signing a short-term note payable.

e. Paid $69,000 cash to reduce the long-term notes payable.

f. Issued 4,000 shares of common stock for $20 cash per share.

g. Declared and paid cash dividends of $131,400.

1. Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any.

2. Reconstruct the journal entry for cash payments for inventory, incorporating the change in the related balance sheet account(s), if any. Notes were not issued for the purchase of inventory.

3. Reconstruct the journal entry for depreciation expense, incorporating the change in the related balance sheet account(s), if any.

4. Reconstruct the journal entry for cash paid for operating expenses, incorporating the change in the related balance sheet account(s), if any.

5. Reconstruct the journal entry for the sale of equipment at a loss, incorporating the change in the related balance sheet account(s), if any.

6. Reconstruct the journal entry for income taxes expense, incorporating the change in the related balance sheet account(s), if any.

7. Reconstruct the entry for the purchase of new equipment.

8. Reconstruct the entry for the issuance of the short-term note payable.

9. Reconstruct the entry for the payment on the long-term note payable.

10. Reconstruct the entry for the issuance of common stock.

11. Reconstruct the entry to record the payment of cash dividends.

12. Close the revenue account(s) to income summary.

13. Close the expense and loss accounts to income summary.

14. Close Income Summary to Retained Earnings.