Reference no: EM13356540

Preparation of Income statement and Balance Sheet.

Financial Data for 2008

1. Sales for the year, all on account, were $221,632.

2. Cash collected from customers on account, $219,514

3. Purchases of merchandise were $132,500, of which $12,425 had not been paid by the end of the year

4. Operating expenses of the current year, paid in cash, were $57,394.  In addition, $1,575 of such expenses were incurred but not paid by the end of the year.

5. Rent paid in cash during the year was $7,800, of which $6,000 related to 2008, and the remainder to 2009.  This payment is not included in #4 above.

6. Accounts receivable of $1,950 was written off as uncollectible.

7. Beginning accounts payable were paid.

8. A cash dividend of $2,500 was paid to the shareholders during the year.

9. Prepaid rent at 12/31/07 was for January and February of 2008.

10. As a result of the physical inventory, it was determined that inventory on hand at 12/31/08 was $27,500.

11. Based on an aging of the accounts receivable, it was determined that the allowance for bad debts at 12/31/08 should be $1,100.

12. Depreciation expense for the year is $2,700 (classified as an operating expense).

13. The note payable bears simple interest at 8% annually.  Interest for 2008 is due January 3, 2009.

14. Income tax expense is 20% of net income before taxes.  These taxes are payable March 15, 2009.