Maurice Tutor
$15/per page/Negotiable
The following balances were taken from the general ledger of Benson Company on January 1, 2003:
|
Cash |
$13,500 |
 |
|
Short-Term Investments |
10,000 |
 |
|
Accounts Receivable. |
12,500 |
 |
|
Inventory |
15,000 |
 |
|
Land. |
25,000 |
 |
|
Buildings |
75,000 |
 |
|
Equipment |
20,000 |
 |
|
Notes Payable |
17,500 |
|
|
Accounts Payable . |
12,500 |
|
|
Salaries and Wages Payable. |
2,500 |
|
|
Mortgage Payable . |
37,500 |
|
|
Capital Stock (7,000 shares outstanding). |
70,000 |
|
|
Retained Earnings |
31,000 |
|
During 2003, the company completed the following transactions:
a. Purchased inventory for $110,000 on credit.
b. Issued an additional $25,000 of capital stock (2,500 shares) for cash.
c. Paid property taxes of $4,500 for the year 2003.
d. Paid advertising and other selling expenses of $8,000.
e. Paid utilities expense of $6,500 for 2003.
f. Paid the salaries and wages owed for 2002. Paid additional salaries and wages of $18,000 during 2003.
g. Sold merchandise costing $105,000 for $175,000. Of total sales, $45,000 were cash sales and $130,000 were credit sales.
h. Paid off notes of $17,500 plus interest of $1,600.
i. On November 1, 2003, received a loan of $10,000 from the bank.
j. On December 30, 2003, made annual mortgage payment of $2,500 and paid interest of $3,700.
k. Collected receivables for the year of $140,000.
l. Paid off accounts payable of $112,500.
m. Received dividends and interest of $1,400 on short-term investments during 2003. (Record as Miscellaneous Revenue.)
n. Purchased additional short-term investments of $15,000 during 2003. (Note: Short-term investments are current assets.)
o. Paid 2003 corporate income taxes of $11,600.
p. Paid cash dividends of $7,600.
Required
1. Journalize the 2003 transactions. (Omit explanations.)
2. Set up T-accounts with the proper account balances at January 1, 2003, and post the journal entries to the T-accounts.
3. Determine the account balances, and prepare a trial balance at December 31, 2003.
4. Prepare an income statement and a balance sheet. (Remember that the dividends account and all revenue and expense accounts are temporary retained earnings accounts.)
5. Interpretive Question: Why are revenue and expense accounts used at all?