Question

Mountain Sports, Inc., is a retailer that has engaged you to assist in the preparation of its financial statements at December 31, 2018. Following are the correct adjusted account balances, in alphabetical order, as of that date. Each balance is the “normal” balance for that account. (Hint: The “normal” balance is the same as the debit or credit side that increases the account.)

Accounts payable	$	13,100
Accounts receivable		3,600
Accumulated depreciation: office equipment		12,900
Additional paid-in capital (common stock)		7,400
Bonds payable (due December 31, 2021)		22,800
Cash		14,500
Common stock (2,600 shares, $10 par value)		26,000
Cost of goods sold		107,280
Deferred income taxes		6,100
Depreciation expense: office equipment		2,300
Dividends declared		4,800
Income tax expense		8,190
Insurance expense		870
Land		40,000
Merchandise inventory		20,600
Notes payable (due December 31, 2019)		3,000
Office equipment		42,600
Office supplies		870
Office supplies expense		460
Preferred stock (300 shares, $20 par value)		6,000
Premium on bonds payable		1,750
Prepaid rent		1,440
Rent expense		5,300
Retained earnings (January 2018)		21,800
Salaries expense		87,995
Sales		226,100
Sales returns and allowances		2,200
Sales taxes payable		3,500
Treasury stock (300 common shares at cost)		3,375
Utilities expense		4,070

Comprehensive Problem 3 Part 1

a. Prepare an income statement for the year ended December 31, 2018.

b. Prepare a statement of retained earnings for the year ending December 31, 2018.

c. Prepare a statement of financial position as of December 31, 2018. (Amounts to be deducted should be indicated by minus sign.)

Answer 1