(Appendixes) ADJUSTING ENTRIES AND PREPARATION OF FINANCIAL STATEMENTS. Sacramento Stores’ unadjusted trial balance as of December 31, 19x2, appears below:

The following information is also available for preparation of adjusting entries for Sacramento:

a) An electric bill in the amount of $1,100 is unrecorded and unpaid at year-end.

b) Three months’ insurance at $200 per month applies to 19x38 (is prepaid) at December 31, 19x2.

c) Five months’ interest at 12% is unpaid and unrecorded on a $70,000 note payable at year-end.

d) At the time of its purchase the building had an expected life of 20 years and expected residual value of $25,000.

e) Based on a physical inventory, the appropriate amount for merchandise inventory has been determined to be $41,800.

f) The income tax rate is 25%.

REQUIRED:

1. Prepare adjusting entries for 19x2.

2. Prepare an income statement, a statement of changes in retained earnings, and a balance sheet using adjusted account balances. LO6