SMC, Inc. Balance Sheet December 31, 2018

Assets

Cash ... $34,500 Accounts receivable .25,000 Inventory ..10,000Supplies .. 200 Total assets.. $69,700 Liabilities andStockholders’ Equity Liabilities: Accounts payable .. $12,000Salaries payable .. 1,000 Income taxes payable .. 3,675 Totalliabilities.. $16,675 Stockholders’ equity: Capital stock (10,000shares outstanding).. $25,000 Retained earnings .. 28,025 Totalstockholders’ equity ...53,025 Total liabilities and stockholders’equity.. $69,700

SMC, Inc. Income Statement For the Year EndedDecember31,2018

Sales revenue .. $110,000 Rent revenue.. 1,000 Total revenues..$111,000 Less cost of goods sold.. 60,000 Gross profit .. $ 51,000Less operating expenses: Supplies expense .. $ 400 Salaries expense.. 22,000 Miscellaneous expense.. 4,100 26,500 Income beforetaxes.. $ 24,500 Less income taxes.. 3,675 Net income.. $ 20,825Earnings per share ($20,825 / 10,000shares) $ 2.08

SMC, Inc. Post-Closing Trial Balance December 31, 2018 DebitsCredits

Cash .. $34,500 Accounts Receivable.. 25,000 Inventory .. 10,000Supplies ..200 Accounts Payable.. $12,000 Salaries Payable .. 1,000Income Taxes Payable.. 3,675 Common Stock..25,000 Retained Earnings.. 28,025 Totals.. $69,700 $69,700

You are also given the following information that summarizes thebusiness activity for the current year, 2019

a. Issued 10,000 additional shares of common stock for $25,000cash on January 1st.

b. Borrowed $10,000 on March 1, 2019, from Downtown Bank as along-term loan. The interest rate on the loan is 5% and Interestfor the year is payable on January 1, 2020.

c. Paid $9,000 cash on April1 to lease a building for oneyear.

d. Received $4,800 on May 1 from a tenant for one year’srent.

e. Paid $3,600 on June 1 for a one-year insurance policy.

f. Purchased $2,200 of supplies for cash on June 15th.

g. Purchased inventory for $100,000 on account on July 1.

h. August1, sold inventory for $170,000 on account; cost of themerchandise sold was $90,000.

i. Collected $110,000 cash from customers’ accounts receivableon August 20th.

j. September 1, Paid $85,000 cash for inventories purchasedearlier during the year.

k. September 20th paid $31,000 for sales reps’ salaries,including $1,000 owed at the beginning of 2018.

l. Dividends for $9,500 were paid on October 20th.

m. The income taxes payable for the year of 2018 were paid onNovember 15th.

n. For adjusting entries, all prepaid expenses are initiallyrecorded as assets, and all unearned revenues are initiallyrecorded as liabilities (this is just informational).

o. At year-end, $850 worth of supplies are on hand.

p. At year-end, an additional $6,500 of sales salaries are owed,but have not yet been paid.

q. Prepare an adjusting entry to recognize the taxes owed for2019. The corporate tax rate is 25% of the income before incometaxes.

Set up T-accounts and enter the beginning balances fromthe December 31, 2018, post-closing trial balance for SMC. Post allcurrent year journal entries to the T-accounts.