The following list summarizes the transactions that took place during a start ups second year of operations.

Fantastic news! We've Found the answer you've been seeking!

Question:

The following list summarizes the transactions that took place during a start up’s second year of operations. Using the information below (and assuming FIFO for inventory), prepare a list of the appropriate journal entries, including any necessary adjusting entries, and create a Balance Sheet and Income Statement. Once you have created the financial statements, provide the appropriate closing entries. Recall that there were 280 units of inventory left at the end of Year One. While the company uses FIFO for internal reporting purposes, it reports Inventory under LIFO for financial statement purposes ($2400). Therefore, you will need to calculate what the LIFO reserve adjustment would be in Year Two and provide the necessary adjusting entry.

To summarize:

- Create journal entries and adjusting entries

- Create a Balance Sheet and Income Statement

- Create Closing Entries

Transactions and information for the year:

a). Jan 2nd, ordered and received 200 units of inventory purchased on account for $14 each

b). Jan 15th, paid $3,400 of accounts payable.

c). Feb 3rd, ordered and received 100 units of inventory purchased on account for $16 each

d). Feb 22nd, sold 250 units of inventory at $55 each on account.

e). March 1st, incurred $900 of wages expense

f). Mar 30th, collected $5000 of accounts receivable

g). April 1st, paid $700 of wages payable

h). May 2nd, Paid $1000 of accounts payable

i). June 1st, Paid $196 of taxes payable

j). June 30th, made first interest payment on Note Payable.

k). Oct 12th, sold 100 units of inventory at $56 each.

l). Dec 31st, spent $5000 at end of year to repair PPE ($1500) and to improve PPE ($3500). Revised useful life is 5 more years. Since the improvements occurred at the end of Year Two, the revised depreciation scheme will only apply to Year Three.

m). Estimated that 5% of Year 2 sales on account would not be collected.

n). Estimated tax rate is 35%