porter corporation s balance sheet at december 31 2011 is presented below 534471

Porter Corporation”s balance sheet at December 31, 2011, is presented below.

During January 2012, the following transactions occurred. Porter uses the perpetual inventory method.

Jan. 1 Porter accepted a 4-month, 8% note from Anderko Company in payment of Anderko”s $1,200 account.

Jan. 3 Porter wrote off as uncollectible the accounts of Elrich Corporation ($450) and Rios Company ($280).

Jan. 8 Porter purchased $17,200 of inventory on account.

Jan. 11 Porter sold for $25,000 on account inventory that cost $17,500.

Jan. 15 Porter sold inventory that cost $700 to Fred Berman for $1,000.

Berman charged this amount on his Visa First Bank card. The service fee charged Porter by First Bank is 3%.

Jan. 17 Porter collected $22,900 from customers on account.

Jan. 21 Porter paid $16,300 on accounts payable.

Jan. 24 Porter received payment in full ($280) from Rios Company on the account written off on January 3.

Jan. 27 Porter purchased advertising supplies for $1,400 cash.

Jan. 31 Porter paid other operating expenses, $3,218.

Adjustment data:

1. Interest is recorded for the month on the note from January 1.

2. Bad debts are expected to be 6% of the January 31, 2012, accounts receivable.

3. A count of advertising supplies on January 31, 2012, reveals that $560 remains unused.

4. The income tax rate is 30%. (Hint:Prepare the income statement up to “Income before taxes” and multiply by 30% to compute the amount; round to whole dollars.)

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.

(Include entries for cost of goods sold using the perpetual system.)

(b) Prepare an adjusted trial balance at January 31, 2012.

(c) Prepare an income statement and a retained earnings statement for the month ending January 31, 2012, and a classified balance sheet as of January 31, 2012.