Question

On January 1, 2021, Displays Incorporated had the following account balances:
  

Accounts		Debit			Credit
Cash	$	32,000
Accounts receivable		29,000
Supplies		35,000
Inventory		65,000
Land		237,000
Accounts payable				$	38,000
Notes payable (7%, due next year)					30,000
Common stock					196,000
Retained earnings					134,000
Totals	$	398,000		$	398,000

From January 1 to December 31, the following summary transactions occurred:

1. Purchased inventory on account for $340,000.
2. Sold inventory on account for $620,000. The cost of the inventory sold was $320,000.
3. Received $576,000 from customers on accounts receivable.
4. Paid freight on inventory received, $34,000.
5. Paid $330,000 to inventory suppliers on accounts payable of $338,000. The difference reflects purchase discounts of $8,000.
6. Paid rent for the current year, $52,000. The payment was recorded to Rent Expense.
7. Paid salaries for the current year, $160,000. The payment was recorded to Salaries Expense.

Year-end adjusting entries:

1. Supplies on hand at the end of the year are $9,000.
2. Accrued interest expense on notes payable for the year.
3. Accrued income taxes at the end of December are $28,000.

Prepare an income statement for the period ended January 31, 2021. Choose the appropriate accounts to complete the company's income statement. The unadjusted, adjusted, or post-closing balances will appear for each account, based on your selection.

Answer 1

Income Statement
Sales Revenue	$       6,20,000
Cost of Goods Sold	$       3,20,000
Gross Profit	$      3,00,000
Operating Expenses
Rent Expense	$          52,000
Salaries Expense	$       1,60,000
Supplies Expense	$          26,000
Total Operating Expenses	$       2,38,000
Operating Income	$          62,000
Interest Expense	$            2,100
Income before Income Tax	$          59,900
Income Tax Expense	$          28,000
Net Income	$          31,900