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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. KISSICK CO. Balance Sheet Assets: Cash $ 691,000 Accounts receivable Merchandise inventory 65,000 120.000 876.000 180,000 Total current assets Equipment Total assets Liabilities: Accounts payable a. Issued 191,000 shares of $4-par-value common stock for $764,000 in cash. b. Borrowed $520,000 from Oglesby National Bank and signed a 10% note due in three years. c. Incurred and paid $390,000 in salaries for the year. d. Purchased $700,000 of merchandise inventory on account during the year. e. Sold inventory costing $580,000 for a total of $910,000, 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 $52,000 in cash and agreeing to pay the difference within 90 days. h. Paid the entire $128,000 owed for store equipment and $620,000 of the amount due to suppliers for credit purchases previously recorded. i. Incurred and paid utilities expense of $38,000 during the year. 1. Collected $845,000 in cash from customers during the year for credit sales previously recorded k. At year-end, accrued $52,000 of interest on the note due to Oglesby National Bank 1. At year-end, accrued $20,000 of past-due December rent on the sales facilities. $ 1,056.000 Total current liabilities 0 $ 0 Total liabilities Stockholders' Equity: 0 Total Stockholders' equity Total liabilities and stockholders' equity $ 0
Solution:
First we compute, End. Balance and Income statement, then we prepare balance sheet.
| Cash | |||
| Common stock | $764,000 | $380,000 | Salaries expenses |
| Notes payable | $520,000 | $220,000 | Rent expenses |
| Account receivable | $845,000 | $52,000 | Store equipment |
| $128,000 | Store equipment | ||
| $620,000 | Accounts payable | ||
| $38,000 | Utilities expenses | ||
| End. Bal. | $691,000 | ||
Income statement:
| Sales | $910,000 | |
| Cost of goods sold | -$580,000 | |
| Gross profit | $330,000 | |
| Operating expenses: | ||
| Salaries expenses | $380,000 | |
| Rent expenses ($220,000 + $20,000) | $240,000 | |
| Utilities expenses | $38,000 | |
| Interest on notes payable ($520,000 × 10%) | $52,000 | |
| -$710,000 | ||
| Net income (loss) | ($380,000) | |
Kissick Co.
Balance Sheet
| Assets: | |
| Cash | $691,000 |
| Accounts receivable ($910,000 - $845,000) | $65,000 |
| Merchandise inventory ($700,000 - $580,000) | $120,000 |
| Total current assets | $876,000 |
| Store equipment | $180,000 |
| Total assets | $1,056,000 |
| Liabilities: | |
| Accounts payable ($700,000 - $620,000) | $80,000 |
| Rent payable | $20,000 |
| Interest payable | $52,000 |
| Total current liabilities | $152,000 |
| 10% Notes payable | $520,000 |
| Total liabilities | $672,000 |
| Stockholders' equity: | |
| Common stock | $764,000 |
| Retained earnings | ($380,000) |
| Total stockholders' equity | $384,000 |
| Total liabilities and stockholders' equity | $1,056,000 |
