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Homework answers / question archive / Following are the transactions and adjustments that occurred during the first year of operations at Kissick Co

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

Accounting

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

Issued 194,000 shares of $5-par-value common stock for $970,000 in cash.

Borrowed $540,000 from Oglesby National Bank and signed a 11% note due in three years.

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

Purchased $700,000 of merchandise inventory on account during the year.

Sold inventory costing $590,000 for a total of $900,000, all on credit.

Paid rent of $220,000 on the sales facilities during the first 11 months of the year.

Purchased $150,000 of store equipment, paying $53,000 in cash and agreeing to pay the difference within 90 days.

Paid the entire $97,000 owed for store equipment and $620,000 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 $59,400 of interest on the note due to Oglesby National Bank.

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.)

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Cash
Common stock $970,000 $390,000 Salaries expense
Notes payable 540,000 220,000 Rent expense
Accounts receivable 855,000 53,000 Store equipment
    97,000 Store equipment
    620,000 Accounts payable
    37,000 Utilities expense
End.Bal. $948,000    

KISSICK CO.

Income Statement

 
Sales   $900,000
Cost of goods sold   590,000
Gross profit   310,000
Operating expenses:    
Salaries expenses $390,000  
Rent expense (220,000+20,000) 240,000  
Utilities expenses 37,000  
Interest on notes payable 59,400  
    (726,400)
Net income (loss)   $(416,400)

KISSICK CO.

Balance Sheet

 
Assets  
Current assets  
Cash $948,000
Accounts receivable ($900,000-855,000) 45,000
Inventory ($700,000-590,000) 110,000
Total current assets 1,103,000
Store equipment 150,000
Total assets 1,253,000
Liabilities and stockholders equity  
Current liabilities  
Accounts payable ($700,000-620,000) 80,000
Rent payable 20,000
Interest payable 59,400
Total current liabilities 159,400
11% Notes payable 540,000
Total liabilities 699,400
Stockholders equity  
Common stock 970,000
Retained earnings (416,400)
Total liabilities and stockholders equity $1,253,000

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