Question

Question: Prepare a classified income statement for the year ended December 31, 2019. The expense accounts represent warehouse expenses, selling expenses, and general and administrative expenses.

Prepare a statement of owner’s equity for the year ended December 31, 2019. No additional investments were made during the period.

Prepare a classified balance sheet as of December 31, 2019. The mortgage payable extends for more than one year.

Cash	$	98,400
Petty Cash Fund		600
Notes Receivable, due 2020		12,000
Accounts Receivable		139,600
Allowance for Doubtful Accounts				$	3,200
Interest Receivable		120
Merchandise Inventory		127,900
Warehouse Supplies		2,700
Office Supplies		640
Prepaid Insurance		4,040
Land		15,400
Building		104,000
Accumulated Depreciation—Building					16,400
Warehouse Equipment		19,200
Accumulated Depreciation—Warehouse Equipment					9,200
Office Equipment		8,800
Accumulated Depreciation—Office Equipment					3,600
Notes Payable, due 2020					14,400
Accounts Payable					56,300
Interest Payable					340
Loans Payable—Long-Term					14,000
Mortgage Payable					17,000
Colin O’Brien, Capital (Jan. 1)					321,020
Colin O’Brien, Drawing		70,050
Income Summary		130,800			127,900
Sales					1,098,300
Sales Returns and Allowances		7,800
Interest Income					520
Purchases		457,000
Freight In		9,200
Purchases Returns and Allowances					13,050
Purchases Discounts					8,640
Warehouse Wages Expense		108,000
Warehouse Supplies Expense		5,200
Depreciation Expense—Warehouse Equipment		2,800
Salaries Expense—Sales		151,100
Travel Expense		23,400
Delivery Expense		36,825
Salaries Expense—Office		84,400
Office Supplies Expense		1,160
Insurance Expense		9,275
Utilities Expense		7,400
Telephone Expense		3,220
Payroll Taxes Expense		31,000
Building Repairs Expense		3,100
Property Taxes Expense		15,800
Uncollectible Accounts Expense		2,980
Depreciation Expense—Building		5,000
Depreciation Expense—Office Equipment		1,560
Interest Expense		3,400
Totals	$	1,703,870		$	1,703,870

Answer 1

Income Statement
For the year ended December 31, 2019
Operating revenue
Sales		1,098,300
Less: Sales returns		(7,800)
Net sales			1,090,500
Cost of goods sold
Opening stock		130,800
Purchases	457,000
Freight in	9,200
Delivered cost of purchases	466,200
Purchase returns	(13,050)
Purchase discounts	(8,640)
Net delivered cost of purchase		444,510
Total merchandise of sale		575,310
Less: Closing stock		(127,900)
Cost of goods sold			447,410
Gross profit on sales			643,090
Operating expenses
Warehouse expenses
Warehouse wages expense	108,000
Warehouse supplies expense	5,200
Depreciation expense—Warehouse equipment	2,800
Total warehouse expenses		116,000
Selling expenses
Salaries expense—Sales	151,100
Travel and entertainment expense	23,400
Delivery wages expense	36,825
Total selling expenses		211,325
General and administrative expenses
Salaries expense—Office	84,400
Office supplies expense	1,160
Insurance expense	9,275
Utilities expense	7,400
Telephone expense	3,220
Payroll taxes expense	31,000
Building repairs expenses	3,100
Property taxes expense	15,800
Uncollectible accounts expense	2,980
Depreciation expense—Building	5,000
Depreciation expense—Office equipment	1,560
Total general and administrative exp.		164,895
Total operating expenses			492,220
Income from operations			150,870
Other Income
Interest Income		520
Other expenses
Interest expenses		(3,400)
Net Non operating expenses			(2,880)
Net Income for the year			147,990
Statement of Owner's Equity
For the year ended December 31, 2019
Colin O’Brien, Capital, January 1, 2019			321,020
Net income for year		147,990
Less: Withdrawals for year		70,050
Increase in capital			77,940
Colin O’Brien, Capital, December 31, 2019			398,960
Balance Sheet
December 31, 2019
Assets
Current assets
Cash			98,400
Petty cash fund			600
Notes receivable			12,000
Accounts receivable		139,600
Less: Allowance for doubtful accounts		(3,200)	136,400
Interest Receivable			120
Merchandise inventory			127,900
Prepaid expenses
Warehouse supplies		2,700
Office supplies		640
Prepaid insurance		4,040
			7,380
Total current assets			382,800
Plant and equipment
Land		15,400
Building	104,000
Less: Accumulated depreciation	(16,400)	87,600
Warehouse equipment	19,200
Less: Accumulated depreciation	(9,200)	10,000
Office equipment	8,800
Less: Accumulated depreciation.	(3,600)	5,200
Total plant and equipment			118,200
Total assets			501,000
Liability and Owner’s Equity
Current liabilities
Notes payable		14,400
Accounts payable		56,300
Interest payable		340
Total current liabilities			71,040
Long-term liabilities
Mortgage payable		17,000
Loans payable		14,000
Total long term liabilities			31,000
Total liabilities			102,040
Owner's Equity
Colin O’Brien, Capital			398,960
Total Liability and Owner’s Equity			501,000