Question

Morgan Company's balance sheet at December 31, 2019, is presented below MORGAN COMPANY Balance Sheet December 31, 2019 Cash Inventory Prepaid Insurance Equipment $31,500 Accounts Payable 30,250 Interest Payable 5,904 Notes Payable 39,120 Owner's Capital $12,250 273 54,500 39,751 $106,774 $106,774 During January 2020, the following transactions occurred. (Morgan Company uses the perpetual inventory system.) 1. Morgan paid $273 interest on the note payable on January 1, 2020. The note is due December 31, 2021 2. Morgan purchased $241,000 of inventory on account. 3 Morgan sold for $485,000 cash, inventory which cost $264,000. Morgan also collected $31,525 in sales taxes. 4 Morgan paid $224,000 in accounts payable. 5 Morgan paid $17,000 in sales taxes to the state. 6. Paid other operating expenses of $21,000 7, On January 31, 2020, the payroll for the month consists of salaries and wages of $62,000. All salaries and wages are subject to 7.65% FICA taxes. A total of $9,000 federal income taxes are withheld. The salaries and wages are paid on February 1

Answer 1

Journal Entries
	Particulars	Debit	Credit
1	Interest Payable	273
	Cash		273
2	Inventory	241000
	Accounts Payable		241000
3	Cash	485000
	Inventory		264000
	Sales Tax Payable		31525
	Profit & Loss		189475
4	Accounts Payable	224000
	Cash		224000
5	Sales Tax Payable	17000
	Cash		17000
6	Operating Expenses	21000
	Cash		21000
7	Salaries & Wages	62000
	FICA Taxes		4743
	Federal Income Tax		9000
	Salaries & Wages Payable		48257
8	Interest Expense	273
	Interest Payable		273
9	Insurance Expense	492
	Prepaid Insurance		492
10	Depreciation	599
	Equipment		599
11	Payroll Tax Expenses	8587
	FICA Taxes		4743
	State Unemployment Taxes		3348
	Federal Unemployment Taxes		496

Trial Balance
Particulars	Debit	Credit
Inventory		23000
Accounts Payable		17000
Sales Tax Payable		14525
Operating Expenses	21000
Salaries and Wages	62000
FICA taxes Payable		9486
Federal Income Taxes Payable		9000
Salaries and Wages Payable		48257
Interest Expense	273
Insurance Expense	492
Prepaid Insurance		492
Depreciation	599
Equipment		599
Payroll Tax Expense	8587
State Unemployment Taxes Payable		3348
Federal Unemployment Taxes Payable		496
Cash	222727
Profit and Loss		189475
	315678	315678

Income Statement
Revenue
Other Revenue	453475
Other Revenue	0
Total Revenues	453475
Cost of Goods Sold	264000
Gross Profit	189475
Expenses
Operating Expenses	21000
Salaries and Wages	62000
Interest Expense	273
Insurance Expense	492
Depreciation	599
Payroll Expense	8587
Total Expenses	92951
Net Income	96524

Owner's Equity Statement
Opening Owner's Capital	39751
Net Income	96524
Closing Owner's Capital	136275

Balance Sheet
Assets
Non Current Assets
Equipment	38521	38521
Current Assets
Inventory	7250
Cash And Cash Balance	254227
Prepaid Insurance	5412	266889
Total Assets		305410
Liabilities and owners Equity
Owner's Equity
Capital	136275	136275
Non-Current Liabilities
Notes Payable	54500	54500
Current Liabilities
Accounts Payable	29250
Interest Payable	273
Sales Tax Payable	14525
FICA Taxes Payable	9486
Federal Income Taxes Payable	9000
Salaries and Wages Payable	48257
State Unemployment Taxes Payable	3348
Federal Unemployment Taxes Payable	496	114635
Total Liabilities		305410