The company performs adjusting entries monthly. Closing entries are performed annually on May 31.

During May, the corporation entered into the following transactions:

• May 1: Issued 40,000 shares of capital stock in exchange for a total of $400,000 cash.
• May 1: Purchased a piece of equipment to be used in the operations of the business for $300,000 that will assist with a more efficient production. Paid $100,000 cash and issued a two-year note payable for $200,000. The note plus all 24 months of accrued interest are due April 30, 2017. The interest rate on the note is 5%.
• May 1: Paid $15,000 to SSR as three months advance rent on the warehouse used in daily manufacturing.
• May 4: Paid salaries in May totaling $27,000. (Ignore payroll taxes.)
• May 8: Purchased office supplies (e.g., copy paper, ink toner, pens, etc.) on account from Office Depot, $4,200. Payment due in 30 days.
• May 15: Excluding the Wilmington General advance, fees earned during the first 15 days of May amounted to $95,100, of which $47,000 was received in cash. The remaining amount will be customer purchases on account.
• May 18: Purchased on account from Parts Plus, Inc., $1,700 in parts needed to repair a server for a local law firm. (Debit an expense account.) Payment is due in 10 days.
• May 23: Collected $22,000 of the accounts receivable recorded on May 15.
• May 26: Paid salaries in May totaling $27,000. (Ignore payroll taxes.)
• May 27: Paid the account payable to Parts Plus., $1,700.
• May 28: Declared a dividend of 10 cents per share, payable on June 15, 2015.
• May 29: Paid the May utilities in the amount of $985.
• May 31: Purchased a 24-month warranty insurance policy for $24,000. This policy protects the company against liability for defects and warranties for the computer equipment that is sold and leased. The policy goes into effect on June 1, 2015.
• May 31: Paid monthly cable bill of 684 to Suddenlink.
• May 31: Collected Sales earned during the second half of May, which amounted to $120,700 and of which $86,300 was received in cash. The remaining amount is customer purchases on account.

Data for Adjusting Entries

1. The advance payment of rent on May 1 covered a period of three months.
2. The annual interest rate on the note payable is 5 percent.
3. The machine purchased May 1, 2015 is being depreciated by the straight-line method over a period of five years.
4. Office supplies on hand at May 31 are estimated at $440.
5. Employee salaries earned by employees since the last payroll date (May 26) amounted to $9,642 at the month end.

Instructions

Complete the following for this assignment:

• Journalize the May transactions.
• Prepare an unadjusted trial balance.
• Prepare the necessary adjusting entries for May.
• Prepare an adjusted trial balance.
• Prepare a balance sheet, an income statement, and a statement of retained earnings for the year ended May 31, 2015.
• Prepare closing entries.
• Prepare a post-closing trial balance. The post-closing trial balance should reveal only permanent accounts that remain open for the next accounting period.
• Prepare 3 profitability ratios, 3 liquidity ratios, and 2 solvency ratios (be sure to show your calculations).
• After completing the accounting cycle and financial analysis, summarize the results in a double-spaced paper of 1-2 pages. The paper should be properly developed and formatted according to APA formatting guidelines.