S&X Co. is a retail store owned by Paul Tuner. During the monthof November, the equity accounts were affected by the followingevents:
Nov.9 Turner invested an additional $15,000 in the business.
Nov.15 Tuner withdrew $1,500 for his salary for the first two weeksof the month.
Nov.30 Turner withdrew $1,500 for his salary for the second twoweeks of the month.
Nov.30 S&X distributed $1,000 or earnings to Turner.
INSTRUCTIONS:
a.Assuming that the business is organized as a soleproprietorship:
1.Prepare the journal entries to record the above events in theaccounts of S&X.
2.Prepare the closing entries for the month of November. Assumethat after closing all of the revenue and expense accounts, theIncome Summary account has a balance of $5,000.
Hint: Record the investment in a separate capital account and thewithdrawals (salary) in a separate drawing account. Close thedrawing account into the capital account as part of the closingentries.
b. Assuming that the business is organized as a corporation.
3.Prepare the journal entries to record above events. Assume thatthe distribution of the earnings on November 30 was payment of adividend that was declared on November 20.
4. Prepare the journal entries to record above events. Assume thatafter closing all of the revenue & expense accounts (exceptIncome Tax Expense) the Income Summary account has a a balance of$2000. Before preparing the closing entries, prepare the entries toaccrue income tax expense for the month and to close the Income TaxExpense account to the Income Summary account. Assume that thecorporate income tax rate is 30%.
c. Explain the causes of the differences in the net income betweenS&X as a sole proprietorship and S&X as a corporation.
d. Describe the effects of the business operations on Turnersindividual income tax return, assuming that the business isorganized as 1) a sole proprietorship and 2) a corporation.