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On January 1, Kevin Reynolds, a student at State U, decides to start a business. Kevin has noticed that various student organizations around campus are having more and more need for mass produced copies of programs on CDs. While a lot of students have a CD drive on their computers that can write to CDs, it is a slow process when a high volume of CDs is needed. Kevin believes that with a beginning investment in specialty equipment, he can provide a valuable product to the college community and earn some profit. On January 1, Year One, Kevin officially begins Kevins CD Kopies.

Part 1:The following occur during January: 1. Kevin deposits $500 of his own money into the companys checking account as his capital contribution.

2. As president of the company, Kevin signs a note payable in the amount of $1,000 from Neighborhood Bank. The note is due from the company in one year.

3. KCDK (Kevins CD Kopies) purchases a CD duplicator (a piece of equipment), which can copy seven CDs at one time. The cost is $1,300, and he pays cash.

4. KCDK purchases 500 blank CDs for $150 on account.

5. KCDK pays $20 cash for flyers that are used as advertising.

6. KCDK quickly catches on with the student groups on campus. KCDK sells 400 CDs to various groups for $0.80 per CD. KCDK receives cash payment for 300 of the CDs, and the student groups owe for the other 100 CDs.

7. KCDK pays $100 on its accounts payable.

8. KCDK receives $40 in advance to copy 50 CDs for a student group. He will not begin work on the project until February.

9. KCDK incurs $40 in tax expense. The taxes will be paid in February.

Required: A. Prepare journal entries for the previous events as needed. B. Post the journal entries to T-accounts. C. Prepare an unadjusted trial balance for KCDK for January. D. Prepare adjusting entries for the following and post them to the companys T-accounts.

10. Kevins roommate, Mark, helps with copying and delivering the CDs. KCDK pays Mark a salary of $50 per month. Mark will get his first check on February 1.

11. KCDK incurs $10 in interest expense. The interest will be paid with the note at the end of the year.

G. Prepare closing entries for the month of January

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