Milo Corporation’s unadjusted trial balance at December 1, 2022, is presented below 

The following transactions occurred during December. 

Dec. 2 Purchased equipment for $16,000, plus sales taxes of $800 (paid in cash). 

2 Milo sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2022, was $1,800; 2022 depreciation prior to the sale of equipment was $825. 

15 Milo sold for $5,000 on account inventory that cost $3,500. 

23 Salaries and wages of $6,600 were paid. 

Adjustment data: 

1. Milo estimates that uncollectible accounts receivable at year-end are $4,000. 

2. The note receivable is a 1-year, 8% note dated April 1, 2022. No interest has been recorded. 

3. The balance in prepaid insurance represents payment of a $3,600, 6-month premium on September 1, 2022. 

4. The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000. 

5. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost. 

6. The equipment purchased on December 2, 2022, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800. 

7. The patent was acquired on January 1, 2022, and has a useful life of 9 years from that date. 

8. Unpaid salaries at December 31, 2022, total $2,200. 

9. Both the short-term and long-term notes payable are dated January 1, 2022, and carry a 10% interest rate. All interest is payable in the next 12 months. 

10. Income tax expense was $15,000. It was unpaid at December 31. 

Instructions 

a. Prepare journal entries for the transactions listed above and adjusting entries. 

b. Prepare an adjusted trial balance at December 31, 2022. 

c. Prepare a 2022 income statement and a 2022 retained earnings statement. 

d. Prepare a December 31, 2022, balance sheet.

Transcribed Image Text:

Debit Credit Cash Accounts Receivable Notes Receivable Interest Receivable $ 22,000 10,000 -0- 36,200 3,600 Inventory Prepaid Insurance Debit Credit Land $ 20,000 Buildings Equipment 150,000 60,000 Patent 9,000 Allowance for Doubtful Accounts 500 Accumulated Depreciation-Buildings Accumulated Depreciation-Equipment Accounts Payable Salaries and Wages Payable Notes Payable (due April 30, 2023) Income Taxes Payable Interest Payable Notes Payable (due in 2028) Common Stock 50,000 24,000 27,300 -0- 11,000 -0- -0- 35,000 50,000 Retained Earnings Dividends 63,600 12,000 Sales Revenue 900,000 Interest Revenue -0- Gain on Disposal of Plant Assets Bad Debt Expense -0- -0- Cost of Goods Sold 630,000 Depreciation Expense Income Tax Expense Insurance Expense -0- -0- -0- Interest Expense Other Operating Expenses Amortization Expense Salaries and Wages Expense -0- 61,800 -0- 110,000 $1,161,400 $1,161,400