Unifying Concepts: First Steps in the Accounting Cycle The following balances were taken from the general ledger of Holland Company on January 1, 2009:

During 2009, the company completed the following transactions:

a. Purchased inventory for $95,000 on credit.

b. Issued an additional $40,000 of capital stock (4,000 shares) for cash.

c. Paid property taxes of $5,200 for the year 2009.

d. Paid advertising and other selling expenses of $6,500.

e. Paid utilities expense of $4,800 for 2009.

f. Paid the salaries and wages owed for 2008. Paid additional salaries and wages of $23,000 during 2009.

g. Sold merchandise costing $111,000 for $167,000. Of total sales, $38,000 were cash sales and $129,000 were credit sales.

h. Paid off notes of $15,500 plus interest of $1,200.

i. On November 1, 2009, received a loan of $15,000 from the bank.

j. On December 30, 2009, made annual mortgage payment of $3,300 and paid interest of $700.

k. Collected receivables for the year of $132,000.

l. Paid off accounts payable of $110,500.

m. Received dividends and interest of $1,100 on short-term investments during 2009. (Record as Miscellaneous Revenue.)

n. Purchased additional short-term investments of $12,000 during 2009. (Note: Short-term investments are current assets.)

o. Paid 2009 corporate income taxes of $6,300.

p. Paid cash dividends of $6,100.

Required:

1. Journalize the 2009 transactions. (Omit explanations.)

2. Set up T-accounts with the proper account balances at January 1, 2009, and post the journal entries to the T-accounts.

3. Determine the account balances, and prepare a trial balance at December 31, 2009.

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?