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December 31, 2013
During 2014, the following transactions occurred.
Trevor paid $2,500 interest on the bonds on January 1, 2014.
Trevor purchased $241,100 of inventory on account.
Trevor sold for $480,000 cash inventory which cost $265,000. Trevor also collected $28,800 sales taxes.
Trevor paid $230,000 on accounts payable.
Trevor paid $2,500 interest on the bonds on July 1, 2014.
The prepaid insurance ($5,600) expired on July 31.
On August 1, Trevor paid $10,200 for insurance coverage from August 1, 2014, through July 31, 2015.
Trevor paid $17,000 sales taxes to the state.
Paid other operating expenses, $91,000.
Redeemed the bonds on December 31, 2014, by paying $48,000 plus $2,500 interest.
Issued $90,000 of 8% bonds on December 31, 2014, at 103. The bonds pay interest every June 30 and December 31.
Recorded the insurance expired from item 7.
The equipment was acquired on December 31, 2013, and will be depreciated on a straight-line basis over 5 years with a $3,000 salvage value.
The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)
(You may want to set up T-accounts to determine ending balances.)
Prepare journal entries for the transactions listed above and adjusting entries.
Prepare an adjusted trial balance at December 31, 2014.
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