XYZ Inc.s fiscal year end is December 31 and the company uses the periodic inventory method.

2019 Transactions

1. On October 28, 2019, XYZ Inc. was incorporated to begin operating a new retail business.

2. On November 3, 2019, four new owners transferred $40,000 cash to the corporation for 4,000 shares (1,000 shares each owner).

3. A building was purchased for $28,000 on December 14, 2019, for use beginning in 2020. It is expected to have a 20-year life with $5,000 salvage.

4. Equipment costing $6,000 was purchased December 16, 2019, for use beginning in 2020. It is expected to last 5 years with $1,000 salvage value.

5. The firm arranged to borrow $10,000 from the bank by signing a Note paying 7% interest and effective December 31, 2019 due December 31, 2021.

Required for 2019

1. Write journal entries for each transaction.

2. Post each transaction to a general ledger (T-account or spreadsheet format) and prepare the trial balance.

3. Prepare the basic financial statements for the year.

2020 Transactions

1. During 2020, $121,000 in sales were made on account. Collections from customers were $102,000 for the year.

2. During 2020, $84,000 in inventory purchases were made on account. Payments to vendors were $71,000 for the year.

3. During 2020, $20,000 in salary cost was incurred from employees working. Salary paid was $18,000 for the year.

4. On January 2, 2020 15 months of rent was paid in advance for $15,000. 12 months were used during 2020.

5. On June 30, 2020, 1,000 new shares of common stock were issued in exchange for $12,000 cash.

6. On September 9, 2020, land to open a new store is purchased for $14,000 cash.

7. On December 31, 2020, the loan is repaid with interest.

8. Equipment and building were used during 2020 & depreciation recorded (building used SL, equipment DDB [Double Declining Balance, i.e. 2 times the SL rate).

9. Inventory is counted and $17,000 remains unsold at December 31, 2020.

10. The income tax rate is 40%.

Required for 2020

1. Write journal entries for each transaction and year-end adjusting entries.

2. Post each transaction to a general ledger (T-account or spreadsheet format) and prepare the adjusted trial balance.

3. Prepare the basic financial statements for the year.