Morgan Fashions statement of financial position at December 31, 2019, is presented below. During January 2020, the following transactions occurred.
Morgan Fashions’ statement of financial position at December 31, 2019, is presented below.
During January 2020, the following transactions occurred. (Morgan uses the perpetual inventory system.)
1. Morgan paid €250 interest on the note payable on January 1, 2020. The note is due December 31, 2021.
2. Morgan purchased €261,100 of inventory on account.
3. Morgan sold for €440,000 cash, inventory which cost €265,000. Morgan also collected €28,600 in sales taxes.
4. Morgan paid €230,000 in accounts payable.
5. Morgan paid €17,000 in sales taxes to the taxing authority.
6. Paid other operating expenses of €30,000.
7. On January 31, 2020, the payroll for the month consists of salaries and wages of €60,000. All salaries and wages are subject to 7.65% Social Security taxes. A total of €8,900 income taxes are withheld. The salaries and wages are paid on February 1.
8. Interest expense of €250 has been incurred on the notes payable.
9. The insurance for the year 2020 was prepaid on December 31, 2019.
10. The equipment was acquired on December 31, 2019, and will be depreciated on a straight-line basis over 5 years with a €2,000 residual value.
11. Employer’s payroll taxes include 7.65% Social Security taxes.
(You may need to set up T-accounts to determine ending balances.)
a. Prepare journal entries for the transactions listed above and the adjusting entries.
b. Prepare an adjusted trial balance at January 31, 2020.
c. Prepare an income statement, an owner’s equity statement for the month ending January 31, 2020, and a classified statement of financial position as of January 31, 2020.
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