Below are the transactions and adjustments that occurred during the first year o
ID: 2562078 • Letter: B
Question
Below are the transactions and adjustments that occurred during the first year of operations at Kissick Co
Issued 191,000 shares of $5-par-value common stock for $955,000 in cash.
Borrowed $510,000 from Oglesby National Bank and signed a 11% note due in three years.
Incurred and paid $400,000 in salaries for the year.
Purchased $670,000 of merchandise inventory on account during the year.
Sold inventory costing $580,000 for a total of $920,000, all on credit.
Paid rent of $330,000 on the sales facilities during the first 11 months of the year.
Purchased $180,000 of store equipment, paying $53,000 in cash and agreeing to pay the difference within 90 days.
Paid the entire $127,000 owed for store equipment and $610,000 of the amount due to suppliers for credit purchases previously recorded.
Incurred and paid utilities expense of $36,000 during the year.
Collected $845,000 in cash from customers during the year for credit sales previously recorded.
At year-end, accrued $56,100 of interest on the note due to Oglesby National Bank.
At year-end, accrued $30,000 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 T-accounts for each account affected by the transactions.)
(Amounts to be deducted and net loss should be indicated with minus sign.)
KISSICK CO. Income StatementExplanation / Answer
Kissick Co
Income statemnt for the period ended
Sales
920,000
COGS
580,000
Gross Profit
340,000
Other operating expenses
Salaries
400,000
Rent
360,000
Utilities
36,000
Interest
56,100
Total Operating expenses
852,100
Net Income (Loss)
(512,100)
The amounts in Income statement are straight forward from the problem, except for rent.Rent paid 330,000 (Dr)+ rent payable accrued (Dr)30,000 = 360,000 expense for the period.
Kissick Co
Balance Sheet as of xx/xx/xx
Assets
Current Assets
Cash
754,000
Inventory
90,000
Accounts receivable
75,000
Total Current Assets
919,000
Fixed Assets
Store Equipment
180,000
Fixed Assets
180,000
Total Assets
1,099,000
Liabilities and Equity
Liabilities
Current Liabilities
Accounts Payable
60,000
interest payable
56,100
Rent payable
30,000
Total Current Liabilities
146,100
Long term liabilities
Note Payable
510,000
Total Long term liabilities
510,000
Total Liabilities
656,100
Equity
Common Stock
955,000
Net Income (Loss)
(512,100)
Equity
442,900
Total Liabilities and Equity
1,099,000
Ledger Accounts;
Kissick Co
Income statemnt for the period ended
Sales
920,000
COGS
580,000
Gross Profit
340,000
Other operating expenses
Salaries
400,000
Rent
360,000
Utilities
36,000
Interest
56,100
Total Operating expenses
852,100
Net Income (Loss)
(512,100)
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