Porter Corporation's balance sheet at December 31, 2011, is presented below:
PORTER CORPORATION
Balance Sheet
December 31, 2011
Cash 13,100
Accounts Payable 8,750
Accounts Receivable 19,780
Common Stock 20,000
Allowance for doubtful accounts (800)
Retained Earnings 12,730
Inventory 9,400
$41,480 $41,480
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 $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:
a. Prepare journal entries for the transactions listed above and journal entries.
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.