The following list summarizes the transactions that took place during a start ups second year of operations. Using the information below (and assuming FIFO for inventory), prepare a list of the appropriate journal entries, including any necessary adjusting entries, and create a Balance Sheet and Income Statement. Once you have created the financial statements, provide the appropriate closing entries.

Transactions and information for the year: a. Jan 1st Spent $3,500 to improve the first piece of equipment purchased in Year 1. Revised useful life is 5 more years while the new salvage value is $2,000. b. Jan 2nd, ordered and received 200 units of inventory purchased on account for $13 each c. Jan 15th paid $100 to settle a warranty claim from a customer. d. Feb 3r, ordered and received 150 units of inventory purchased on account for $12 each 0. Feb 22nd, sold 250 units of inventory at $65 each. $10,000 was on account. The inventory came with a 1 year warranty. The company expects that providing the warranty will cost 1% of the sales made. e. March 1st, incurred and paid $900 of wages expense f. Mar 30-5, collected $5000 of accounts receivable g. April 15, paid $50 to settle a warranty claim from a customer. h. May 2nd, Paid $4000 of accounts payable. i. June 1st, Paid $409 of taxes payable j. June 30, made first interest payment on Note Payable. k. Aug 12, wrote-off a $250 account receivable for a customer who filed for bankruptcy. p. Oct 12th, sold 100 units of inventory at $56 each. The inventory came with a 1 year warranty. The company expects that providing the warranty will cost 1% of the sales made. 1. Dec 315, spent $1,500 at end of year to repair equipment. m. Estimated that 2% of Year 2 sales on account would not be collected. n. Estimated tax rate is 35%