Explore BrainMass

Prepare an Income Statement and Balance Sheet

Prepare an income statement and balance sheet from transaction data:

a. Issued 200,000 shares of $5-par-value common stock for $1,000,000 in cash.
b. Borrowed $500,000 from the Oglesby National Bank and signed a 12% note due in two years.
c. Incurred and paid $380,000 in salaries for the year.
d. Purchased $640,000 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 $110,000 on the sales facilities during the first 11 months of the year.
g. Purchased $150,000 of store equipment, paying $50,000 in cash and agreeing to pay the difference within 90 days.
h. Paid the entire $100,000 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 $36,000 during the year.
j. Collected $825,000 in cash from customers during the year for credit sales previously recorded.
k. At year-end, accrued $60,000 of interest on the note due to Oglesby National Bank.
l. At year-end, accrued $10,000 of past-due December rent on the sales facilities.

Kissick Income Statement

Cost of Goods Sold -580,000
Gross Profit
Rent Expense
Utilities Expense
Salaries Expense
Operating Income (Loss)
Interest Expense -60,000
Net Income (ignores taxes)

Kissick Balance Sheet

Accounts Receivables
Merchandise Inventory
Total Current Assets
Equipment (problem ignores depreciation)
Total Assets

Accounts Payable
Interest Payable 60,000
Rent Payable
Notes Payable (as a long term liability)
Total Current Liabilities
Long Term Debt/Bonds
Total Liabilities

Owners Equity
Common Stock
Retained Earnings
Total Owners Equity
Total Liabilities and Owners Equity

Solution Summary

This solution illustrates how to prepare an income statement and a balance sheet in good form.