Question

Following are the transactions and adjustments that occurred during the first year of operations at Kissick Co.

1. Issued 192,000 shares of $4-par-value common stock for $768,000 in cash.
2. Borrowed $530,000 from Oglesby National Bank and signed a 11% note due in three years.
3. Incurred and paid $380,000 in salaries for the year.
4. Purchased $640,000 of merchandise inventory on account during the year.
5. Sold inventory costing $590,000 for a total of $920,000, all on credit.
6. Paid rent of $110,000 on the sales facilities during the first 11 months of the year.
7. Purchased $180,000 of store equipment, paying $51,000 in cash and agreeing to pay the difference within 90 days.
8. Paid the entire $129,000 owed for store equipment and $600,000 of the amount due to suppliers for credit purchases previously recorded.
9. Incurred and paid utilities expense of $34,000 during the year.
10. Collected $855,000 in cash from customers during the year for credit sales previously recorded.
11. At year-end, accrued $58,300 of interest on the note due to Oglesby National Bank.
12. At year-end, accrued $10,000 of past-due December rent on the sales facilities.

Required:
a. 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 a T-account for the Cash account since it is affected by most of the transactions.)

	KISSICK CO. Income Statement Sales Cost of goods sold Gross profit $0 Salaries expense Rent expense Utilities expense Loss from operations $0 Interest expense Net loss $0

	KISSICK CO. Balance Sheet Assets: Cash Accounts receivable Merchandise inventory Total current assets 0 Equipment Total assets $0 Liabilities: Accounts payable Rent payable Interest payable Total current liabilities 0 Total liabilities $0 Stockholders' Equity: Common stock Total Stockholders' equity 0 Total liabilities and stockholders' equity $0

Answer 1

KISSICK CO.
Income Statement
PARTICULARS	$
Sales	920,000.00
Cost of goods sold	590,000.00
Gross profit	330,000.00
Salaries expense	380,000.00
Rent expense	120,000.00
Utilities expense	34,000.00
Loss from operations	(204,000.00)
Interest expense	58,300.00
Net loss	(262,300.00)

Balance Sheet
PARTICULARS	$
Assets:
Cash	849,000.00
Accounts receivable	65,000.00
Merchandise inventory	50,000.00
Total current assets	964,000.00
Equipment	180,000.00
Total assets	1,144,000.00
Liabilities:
Accounts payable	40,000.00
Rent payable	10,000.00
Interest payable	58,300.00
Total current liabilities	108,300.00
Long term borrowing (Oglesby)	530,000.00
Total liabilities	638,300.00
Stockholders' Equity:
Common stock	768,000.00
Reserves and Surplus	(262,300.00)
Total Stockholders' equity	505,700.00
Total liabilities and stockholders' equity	1,144,000.00

Cash Account
PARTICULARS	$	PARTICULARS	$
To Share capital	768,000.00	By Salary	380,000.00
To Long term borrowing (Oglesby)	530,000.00	By Rent	110,000.00
To Debtors	855,000.00	By Equipment	180,000.00
		By Creditors	600,000.00
		By utilities	34,000.00
		By balance	849,000.00
	2,153,000.00		2,153,000.00