Problem
Joe has decided to start a new business called Joe's Junkers in January of 20X0. He started the company with $30,000 contribution and issued himself 300 shares of common stock in return. He also borrowed $50,000 from the bank, with $10,000 annual principal payments and 10% interest payments due at the end of each year. He then purchased a computer for $5,000. The computer has a 5 year estimated life and no salvage value. During the year he purchased 100 junk cars for $600 each and sold 80 cars for $1,300 each. The new company paid $6,500 for 13 months rent and $18,000 on wages. At the end of the year, the loan payment was paid (principal and interest). He owed employees $700 in wages at the end of the year. The tax rate is 30% and taxes will be paid in 20X1.
Prepare Journal Entries, T-accounts and financial statements.