The Garden Spot had the following Year 1 Transactions:

Barnes needed to prepare the financial statements for her second year of operation. A lot had happened during the year, and she wanted to make sure she captured it all accurately in preparing those financial statements. Barnes began to go through her notes, receipts, and other documents and compiled the following list of events that had occured during its second year of operation:

1. Barnes reached out to a friend Lawrence, and he had invested $20,000 in the company in exchange for shares of common stock 2. During the first year, Barnes had been operating the business on the part of the property where she and Josh lived. When it beame apparent that the company needed more space, the company purchased a parcel of land adjacent to their property on July 1st for $100,000. The company financed the purchase with a $90,000 loan from National Bank and paid the remaining $10,000 with cash. The loan was to be repaid in equal principal payments over 10 years with an interest rate of 8% and interest was payable at the end of each year when the principal payment was made 3. Purchase of inventory were made throughout the year costing $310,000, $240,000 of which was paid in cash and $70,000 was purchased on account 4. Sales totaled $500,000, $400,000 of which were cash sales, and $100,000 of which were sales on account. The inventory sold had originally cost a total of $300,000 5. Operating expenses incurred were $150,000 all paid in cash 6. Payments made to National Bank totaled $13,000, $10,000 of which was for repayment of the loan principal and $3,000 of which was for payment of interest. These payments were related to the loan the company had obtained on January 1st during its first year of operation. 7. As planned, the $5,000 of wages payable from the prior December were included in employees' paychecks in January of the current year. Payments for all work that employees did in December of the current year was included in employees' paychecks during December, so there were no wages payable at year end 8. Collections from customers on accounts totaled $60,000 during teh year 9. On July 1st, Barnes paid $5,000 to a local marketing firm for a series of ads that would run June 30 to the following year 10. The amount the company still owed supplies as of December 31 totaled $35,000 11. In November, the company received a $10,000 deposit from another customer for plants to be delivered on the following February 12. In November, the company signed a contract with a customer for $20,000 of plants to be delivered the following February 13. When reviewing the list of customers that still owed the company, Barnes recalled a conversation she had during the year with one of those customers who owed The Garden Spot $2,000, during which the customer discussed the challenges he was facing in paying his bills. While Barnes wasn't ready to give up completely on collecting, she had serious doubts about whether The Garden Spot would be able to collect the $2,000 14. On January 1st, Barnes had sold some of the equipment for $600 cash. The equipment that was sold had originally cost $1,000 and had a new book value of $800 at the time of sale ($200 in depreciation for this equipment had been recorded in Year 1) 15. In December, Barnes was approached by a real estate developer, who offered $120,000 for the land she had purchased at the beginning of the year. She decided not to sell the property, but was pleased that the land she had bought had appreciated so quickly and as no worth more than what she paid for it 16. On December 31, the company declared that it would pay dividends of $8,000 on January the following year 17. Did she need to record depreciation on truck and equipment? She recalled doing so during her first year of operations 18. Did she need to record depreciation on the land she purchased during the year? 19. Did she need to record any interest expense on the loan she had obtained to help finance the purchase of the land? She had recorded interest expense on the loan she had taken out when she opened for business, but she made an interest payment during the year on that loan. She would not pay any interest on the loan for the land until June 30th of the following year when she made the loan payment. 20. Did she need to make any adjustments to the prepaid advertising account? 21. Did she need to make any adjustments to the deferred revenue account? 22. Did she need to record anything related to this year's income taxes? The company's income tax rate for the year was 15% but Barnes had decided to wait until April 15th of the following year to pay the current year's income taxes.

Required: 1. Prepare journal entries for items 1 through 16 as required 2. Post the information to T-accounts 3. Record the necessary adjusting entries in items 17 through 22 and post to T-accounts 4. Prepare an income statement that summarizes the results of operations for the year 5. Prepare a balance sheet as of December 31 6. Prepare a statement of cash flow for the year 7. Based on your review of the financial statements, what is your assessment of The Garden Spot's performance during it's second year of operations?

Transaction Record for: Garden Spot Year 1 \begin{tabular}{l|l|l} 3 & Truck Depreciation & 2400 \\ \hline 4 & Equip. Depreciation & 2000 \end{tabular} Transaction Record for: Garden Spot Year 1 \begin{tabular}{l|l|l} 3 & Truck Depreciation & 2400 \\ \hline 4 & Equip. Depreciation & 2000 \end{tabular}