Question

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

a. Issued 192,000 shares of $5-par-value common stock for $960,000 in cash.

b. Borrowed $530,000 from Oglesby National Bank and signed a 11% note due in three years.

c. Incurred and paid $390,000 in salaries for the year.

d. Purchased $720,000 of merchandise inventory on account during the year.

e. Sold inventory costing $590,000 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 $180,000 of store equipment, paying $55,000 in cash and agreeing to pay the difference within 90 days.

h. Paid the entire $125,000 owed for store equipment and $600,000 of the amount due to suppliers for credit purchases previously recorded.

i.Incurred and paid utilities expense of $37,000 during the year.

j. Collected $845,000 in cash from customers during the year for credit sales previously recorded.

k. At year-end, accrued $58,300 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.

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.)

b. Prepare 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.) (Amounts to be deducted and net loss should be indicated with minus sign.)

Answer 1