THIS IS YEARS ONE AND TWO OF A NEW CORPORATION -
Jones, Inc. Year 2016
You have decided to go into the business of selling Widgets. You have incorporated your business under the names of Jones, Inc. On January 1, 2016 you begin by depositing $30,000 cash in the new corporate bank account - $20,000 of the money is yours and $10,000 is borrowed from your Uncle Mike. For the $20,000 which is yours, you (as Jones Inc.) issue yourself 100 shares of common stock. For the $10,000 borrowed from your uncle, you sign a note agreeing to pay back that amount on December 31, 2019 and promise to pay interest of 10% at the end of each year. On January 1, 2016, you bought 8 Widgets for $3,000 each.
During the year you sold 5 Widgets for $7,000 each. You also paid a security deposit of $2,000 (when you rented your office space); advertising expense of $3,000; and 12 months' rent of $12,000. In addition to the cash you invested on January 1st, you also invested a piece of land that you own into the business on August 1st that is worth $40,000 in exchange for 200 more shares of stock. You pay the first year's interest to Uncle Mike of $1,000 on December 31, 2016. Your tax rate is 30% of your income before taxes and you pay 50% of these taxes.
Prepare the Journal Entries, T-accounts, and all four Financial Statements.
Jones, Inc. Year 2017
During the second year, you bought 14 Widgets and sold 12, same cost and retail prices as the first year, but you have arranged terms with your supplier that allow you to pay 25% of the purchase price in cash and the rest in one year. Because of your new financing arrangement with your vendor, you now sell Widgets for 60% down and the rest will be paid for by your customer next year. You paid the same rent. You hired a worker whom you paid $11,000. Tax rate is the same (30% of taxable income). Paid 2016 taxes. You will pay 2017 taxes next year. You paid the interest to Mike on December 31st. You paid office expenses of $12,000 and a dividend of $1,000. You also paid $4,000 for advertising in The Post. On February 1st, you issued 50 shares of common stock for $12,000. You owe your employee $1,000 more in wages at the end of the year.
Prepare the Journal Entries, T-accounts, and all four Financial Statements.