Reference no: EM131751975
Question: Prepare an income statement (ignoring income taxes) for Kissick Co.'s first year of operations and a balance sheet as of the end of the year. (Hint: You may find it helpful to prepare T-accounts for each account affected by the transactions.) (Amounts to be deducted and net loss should be indicated with minus sign.)
a. Issued 194,000 shares of $5-par-value common stock for $970,000 in cash.
b. Borrowed $540,000 from Oglesby National Bank and signed a 11% note due in two years.
c. Incurred and paid $390,000 in salaries for the year.
d. Purchased $740,000 of merchandise inventory on account during the year.
e. Sold inventory costing $580,000 for a total of $900,000, all on credit.
f. Paid rent of $220,000 on the sales facilities during the first 11 months of the year.
g. Purchased $170,000 of store equipment, paying $51,000 in cash and agreeing to pay the difference within 90 days.
h. Paid the entire $119,000 owed for store equipment, and $590,000 of the amount due to suppliers for credit purchases previously recorded.
i. Incurred and paid utilities expense of $38,000 during the year.
j. Collected $825,000 in cash from customers during the year for credit sales previously recorded.
k. At year-end, accrued $59,400 of interest on the note due to Oglesby National Bank.
l. At year-end, accrued $20,000 of past-due December rent on the sales facilities.
| KISSICK CO. |
| Income Statement |
| Sales |
$900,000 |
| Cost of goods sold |
580,000 |
| Gross profit |
$320,000 |
| Salaries expense |
390,000 |
| Rent expense |
240,000 |
| Utilities expense |
38,000 |
|
|
|
|
| Loss from operations |
$(348,000) |
| Interest expense |
(59,400) |
|
|
|
|
| Net loss |
$(407,400) |
| KISSICK CO. |
| Balance Sheet |
| Assets: |
|
| Cash |
|
| Accounts receivable |
|
| Merchandise inventory |
|
|
|
|
|
| Total current assets |
0 |
| Equipment |
170,000 |
| Total assets |
$170,000 |
| Liabilities: |
|
| Accounts payable |
|
| Rent payable |
20,000 |
| Interest payable |
|
|
|
|
|
| Total current liabilities |
20,000 |
|
|
| Total liabilities |
$20,000 |
| Owners' Equity: |
|
| Common stock |
|
| Deficit/Net loss |
|
|
|
|
|
| Total owners' equity |
0 |
| Total liabilities and owners' equity |
$20,000 |
The income statement is complete and correct, but I can't figure out the balance sheet. What is on there is correct, I just can't figure out what amount should be in each box.