Question

McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year.

Cash receipts:
Sale of common stock	$	70,000
Collections from customers		325,000
Borrowed from local bank on April 1, note signed requiring
principal and interest at 12% to be paid on March 31, 2019		35,000
Total cash receipts	$	430,000
Cash disbursements:
Purchase of merchandise	$	197,500
Payment of salaries and wages		77,500
Purchase of office equipment		42,000
Payment of rent on building		10,750
Miscellaneous expenses		12,500
Total cash disbursements	$	340,250

You are called in to prepare financial statements at December 31, 2018. The following additional information was provided to you:

1. Customers owed the company $19,500 at year-end.
2. At year-end, $29,750 was still due to suppliers of merchandise purchased on credit.
3. At year-end, merchandise inventory costing $47,000 still remained on hand.
4. Salaries and wages owed to employees at year-end amounted to $5,250.
5. On December 1, $3,300 in rent was paid to the owner of the building used by McGuire. This represented rent for the months of December through February.
6. The office equipment, which has a 10-year life and no salvage value, was purchased on January 1, 2018. Straight-line depreciation is used.

Required:

Prepare an income statement for 2018 and a balance sheet as of December 31, 2018. (For Balance Sheet only, items to be deducted must be indicated with a negative amount.)

Answer 1

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