Analysis of transactions and preparation of the income statement and balance sheet Zealock Bookstore opened a bookstore near a college campus on July 1, 2008. Transactions and events of Zealock Bookstore during 2008 follow. The firm uses the calendar year as its reporting period.
(1) July 1, 2008: Receives $25,000 from Quinn Zealock for 25,000 shares of the bookstores $1 par value common stack.
(2) July 1, 2008: Obtains a $30,000 loan from a local bank for working capital needs. The loan bean interest at 6% per year. The loan is repayable with interest on June 30, 2009
(3) July 1, 2008: Signs a rental agreement for three years at an annual rental of $20,000. Pays the first years rent in advance.
(4) July 1, 2008: Acquires bookshelves for $4.000 cash. The bookshelves have an estimated useful life of five years and zero salvage value.
(5) July 1, 2008: Acquires computers for $10,000 cash. The computers ha an estimated useful life of three ?~ears and $1.000 salvage value.
(6) July 1, 2008: Makes security deposits with various book distributors totaling $8,000. The deposits are refundable on June 30. 2009. If the bookstore pays on time all amounts due for books purchased from the distributors between July 1, 2008, and June 30, 2009.
(7) During 2008: Purchases books on account from various distributors costing $160,000.
(8) During 2008: Sells books costing $140,000 for $172,800. Of the total sales, $24,600 is for cash, and $148,200 is on account.
(9) During 2008: Returns unsold books and books ordered in error costing $14,600. The firm had not yet paid for these books.
(10) During 2008: Collects $142,400 from sales on account.
(11) During 2008: Pays employees compensation of $16,700.
(12) During 2008: Pays book distributors $139,800 of the amounts due for purchases on account.
(13) December 28, 2008: Receives advances from customers of $850 for special-order books that the bookstore will order and expects to receive during 2009.
(14) December 31, 2008: Records an appropriate amount of interest expense on the loan in (2) for 2008.
(15) December 31, 2008: Records an appropriate amount of rent expense for 2008.
(16) December 31, 2008: Records an appropriate amount of depreciation expense on the bookshelves in (4).
(17) December 31, 2008: Records an appropriate amount of depreciation expense on the computers in (5).
(18) December 31, 2008: Records an appropriate amount of income tax expense for 2008. The income tax rate is 40%. The taxes are payable on March 15, 2009.
a. Using T-accounts enter the 18 transactions and events above.
b. Prepare an income statement for the six months ending December 31, 2008.
c. Prepare a balance sheet on December 31, 2008.
Note: Problem 37 extends this problem to income transact ions for 2009.
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