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Issued 195,000 shares of $5-par-value common stock for $975,000 in cash. Borrowed $520,000 from Oglesby National...
Issued 195,000 shares of $5-par-value common stock for $975,000 in cash. Borrowed $520,000 from Oglesby National Bank and signed a 10% note due in three years. Incurred and paid $390,000 in salaries for the year. Purchased $670,000 of merchandise inventory on account during the year. Sold inventory costing $570,000 for a total of $900,000, all on credit. Paid rent of $110,000 on the sales facilities during the first 11 months of the year. Purchased $170,000 of store equipment, paying $52,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $118,000 owed for store equipment and $600,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $37,000 during the year. Collected $855,000 in cash from customers during the year for credit sales previously recorded. At year-end, accrued $52,000 of interest on the note due to Oglesby National Bank. At year-end, accrued $10,000 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.)
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Expert Solution
| General,Journal | Debit | Credit | |
| Cash | $ 9,75,000.00 | ||
| Common stock | $ 9,75,000.00 | ||
| (Amount invested in the business) | |||
| Cash | $ 5,20,000.00 | ||
| Notes Payable | $ 5,20,000.00 | ||
| (amount borrowed from Oglebuy Bank against 10% note for three years) | |||
| Salaries Expense | $ 3,90,000.00 | ||
| Cash | $ 3,90,000.00 | ||
| (Amount paid for Salaries) | |||
| Merchandise Inventory | $ 6,70,000.00 | ||
| Accounts Payable | $ 6,70,000.00 | ||
| (Amount of Merchandise Inventory purchased on credit) | |||
| Accounts Receivable | $ 9,00,000.00 | ||
| Sales | $ 9,00,000.00 | ||
| (Sale of Merchandise Inventory on Credit) | |||
| Cost of goods sold | $ 5,70,000.00 | ||
| Merchandise Inventory | $ 5,70,000.00 | ||
| (Cost of goods sold) | |||
| Rent Expense | $ 1,10,000.00 | ||
| Cash | $ 1,10,000.00 | ||
| (Amount of Rent paid for 11 months) | |||
| Store Equipment | $ 1,70,000.00 | ||
| Cash | $ 52,000.00 | ||
| Accounts Payable | $ 1,18,000.00 | ||
| (Amount of Equipment purchased by paying $52000 cash and balance within 90 days) | |||
| Accounts Payable($600000+$118000) | $ 7,18,000.00 | ||
| Cash | $ 7,18,000.00 | ||
| (Amount piad due for merchandise purchased and Equipment purchased) | |||
| Utilities Expense | $ 37,000.00 | ||
| Cash | $ 37,000.00 | ||
| (Amount paid for utilities expense) | |||
| Cash | $ 8,55,000.00 | ||
| Accounts Receivable | $ 8,55,000.00 | ||
| (Amount collected from customers) | |||
| Interest Expense | $ 52,000.00 | ||
| Interest Payable | $ 52,000.00 | ||
| (Amount of Interest Payable) | |||
| Rent Expense | $ 10,000.00 | ||
| Rent Payable | $ 10,000.00 | ||
| (Amount of Rent due for one month) | |||
| Cash A/c | |||
| Account Title & Explanation | Dr | Cr | Balance |
| Common Stock | $ 9,75,000.00 | $ 9,75,000.00 | |
| Notes Payable | $ 5,20,000.00 | $ 14,95,000.00 | |
| Salaries Expense | $ 3,90,000.00 | $ 11,05,000.00 | |
| Rent Expense | $ 1,10,000.00 | $ 9,95,000.00 | |
| Store Equipment | $ 52,000.00 | $ 9,43,000.00 | |
| Accounts Payable | $ 7,18,000.00 | $ 2,25,000.00 | |
| Utilties Expense | $ 37,000.00 | $ 1,88,000.00 | |
| Accounts Receivable | $ 8,55,000.00 | $ 10,43,000.00 | |
| Trial Balance | |||
| Cash | $ 10,43,000.00 | ||
| Accounts Receivable | $ 45,000.00 | ||
| Merchandise Inventory | $ 1,00,000.00 | ||
| Stores Equipment | $ 1,70,000.00 | ||
| Accounts Payable | $ 70,000.00 | ||
| Interest Payable | $ 52,000.00 | ||
| Rent Payable | $ 10,000.00 | ||
| Notes Payable | $ 9,75,000.00 | ||
| Common Stock | $ 5,20,000.00 | ||
| Sales | $ 9,00,000.00 | ||
| Cost of goods sold | $ 5,70,000.00 | ||
| Salaries Expense | $ 3,90,000.00 | ||
| Rent Expense | $ 1,20,000.00 | ||
| Utilities Expense | $ 37,000.00 | ||
| Interest Expense | $ 52,000.00 | ||
| Total | $ 25,27,000.00 | $ 25,27,000.00 | |
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