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James Corporation's balance sheet at December 31, 2013, is presented below.

James Corporation's balance sheet at December 31, 2013, is presented below.

JAMES CORPORATION

Balance Sheet
December 31, 2014

$ 30,500

25,750

5,600

43,000

$104,850

Account payable

Interest payable

Bonds payable

Common stock

Retained earnings

$ 13,750

2,500

50,000

20,000

18,600

$104,850

Cash
Inventory
Prepaid insurance

Equipment


During 2014, the following transactions occurred:

1. James paid $2,500 interest on the bonds on January 1, 2015.

2. James purchased $241,100 of inventory on account.

3. James sold for $450,000 cash inventory which cost $250,000. Trevor also collected $31,500 sales taxes.

4. James paid $230,000 on accounts payable.

5. James paid $2,500 interest on the bonds on July 1, 2015.

6. The prepaid insurance ($5,600) expired on July 31.

7. On August 1, James paid $12,000 for insurance coverage from August 1, 2015, through July 31, 2016.

8. James paid $24,000 sales taxes to the state.

9. Paid other operating expenses, $91,000.

10. Retired the bonds on December 31, 2014, by paying $47,000 plus $2,500 interest.

11. Issued $90,000 of 8% bonds on December 31, 2015, at 104. The bonds pay interest every June 30 and December 31.

Adjustment data:
1. Recorded the insurance expired from item 7.

2. The equipment was acquired on December 31, 2014, and will be depreciated on a straight-line basis over 5 years with a $3,000 salvage value.

3. The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

Instructions
(You may want to set up T-accounts to determine ending balances.)

(a) Prepare journal entries for the transactions listed above and adjusting entries.

(b) Prepare an adjusted trial balance at December 31, 2015.

=> Totals $652,070

(c) Prepare an income statement and a retained earnings statement for the year ending December 31, 2015, and a classified balance sheet as of December 31, 2015.

=> N.I. $61,880

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