The Hilton Retail Company started operations on September 1, 2016. The following transactions took place in the month of September 2016: Sept 1 Issued 5,000 shares of common stock in exchange for cash of $50,000 Sept 1 Purchased equipment for $20,000 cash Sept 1 Paid $6,000 for rent for the months of September and October Sept 1 Merchandise inventory costing $38,000 is purchased on account. The Company uses the perpetual inventory system. Sept 1 Borrowed $30,000 from the bank, and a note payable is signed. Sept 14 Credit sales for the month are $40,000. The cost of the merchandise was $22,000. (Hint: Two entries are required here) Sept 16 $20,000 cash is loaned to another company, evidenced by a note receivable. Sept 18 $15,000 is collected on account from customers. Sept 20 $20,000 is paid on account to suppliers of merchandise. Sept 22 Purchased $5,000 of supplies on account Sept 29 Salaries of $7,000 are paid to employees for September. Sept 29 A bill for $2,000 is received from the local utility company for September. It will not be paid until next month. Sept 30 The company pays its shareholders a cash dividend of $1,000.
REQUIRED: (a) Prepare journal entries for the September transactions above. Use good form for the journal entries.
(b) Prepare a trial balance at September 30 based on the journal entries above.
(c) Prepare journal entries for the following adjustments that were deemed necessary at the end of the month: a. The note payable requires the entire $30,000 in principal plus interest at 10% to be paid on August 31, 2017. The date of the loan is September 1, 2016. b. Depreciation on equipment for the month is $500. c. The note receivable is dated September 16, 2016. The note requires the entire $20,000 in principal plus interest at 12% to be repaid in four months (the loan was outstanding for half the month of September). d. The prepaid rent of $6,000 represents rent for the months of August and September. e. $3,000 of supplies purchased on September 22 remained as of September 30
(d) Prepare an adjusted trial balance at September 30 after making the adjustments above.
(e) Prepare an income statement for the month of September. A simple “single step” income statement is fine for this exercise.
(f) Prepare a statement of shareholders’ equity for the month of September.
(g) Prepare a classified balance sheet as of the end of September.
(h) Prepare closing journal entries for the month.
(i) Prepare a post-closing trial balance after making the closing entries above.