GL1201 - Based on Exercise 12-11 LO P2, P3, A1

Use the following financial statements and additional information.

ARNOLD INC. Comparative Balance Sheets June 30, 2019 and 2018
	2019				2018
Assets
Cash	$	77,900			$	17,100
Accounts receivable, net		73,000				57,000
Inventory		63,000				88,000
Prepaid expenses		5,800				7,300
Total current assets		219,700				169,400
Equipment		186,000				172,000
Accum. depreciationEquipment		(45,000	)			(15,000	)
Total assets	$	360,700			$	326,400
Liabilities and Equity
Accounts payable	$	26,000			$	32,000
Wages payable		8,000				19,000
Income taxes payable		4,000				4,400
Total current liabilities		38,000				55,400
Notes payable (long term)		33,000				65,000
Total liabilities		71,000				120,400
Equity
Common stock, $5 par value		240,000				170,000
Retained earnings		49,700				36,000
Total liabilities and equity	$	360,700			$	326,400

ARNOLD INC. Income Statement For Year Ended June 30, 2019
Sales				$	978,000
Cost of goods sold					599,000
Gross profit					379,000
Operating expenses
Depreciation expense	$	81,000
Other expenses		97,000
Total operating expenses					178,000
					201,000
Other gains (losses)
Gain on sale of equipment					5,800
Income before taxes					206,800
Income taxes expense					63,300
Net income				$	143,500

Additional Information

1. A $33,000 note payable is retired at its $33,000 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $79,000 cash.
4. Received cash for the sale of equipment that had cost $65,000, yielding a $5,800 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit..

7. Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any.

   Reconstruct the journal entry for cash payments for inventory, incorporating the change in the related balance sheet account(s), if any.

   Reconstruct the journal entry for depreciation expense, incorporating the change in the related balance sheet account(s), if any.

   Reconstruct the journal entry for cash paid for operating expenses, incorporating the change in the related balance sheet account(s), if any.

   Reconstruct the journal entry for the sale of equipment at a gain, incorporating the change in the related balance sheet account(s), if any.

   Reconstruct the journal entry for income taxes expense, incorporating the change in the related balance sheet account(s), if any.

   Reconstruct the entry to record the retirement of the $33,000 note payable at its $33,000 carrying (book) value in exchange for cash

   Reconstruct the entry for the purchase of new equipment.

   Reconstruct the entry for the issuance of common stock.

   Close all revenue and gain accounts to income summary.

   Close all expense accounts to income summary.

   Close Income Summary to Retained Earnings.

   Reconstruct the journal entry for cash dividends paid.