Preparing Financial Statements for A Company's First Year of Operations

Copies Express was incorporated on November 20, 2009, and began operating on January 2, 2010. The balance sheet as of the beginning of operations is shown in Exhibit 1.

In preparing financial statements for the first year of operations, the accountant reviewed the record of cash receipts and cash disbursements for Copies Express. This information appears in Exhibit 2.

In addition, the accountant examined certain other information relative to operations. These additional items appear in Exhibit 3.

Exhibit 1

Balance Sheet
As of January 2, 2010

Assets

Cash $2,000
Supplies 24,400
Building and equipment 300,000
Land 12,000
Total 338,400

Liabilities and Owners' Equity

Accounts payable $10,400
Bank loan 24,000
Capital stock 304,000
Total 338,400

Exhibit 2

Cash Receipts and Disbursements: 2010
Cash receipts:
Cash Sales $176,450
Collect accounts receivable 64,750
Total 241,200

Cash disbursements:
Wages and salaries $85,750
Heat, light, power 15,000
Additional supplies 52,600
Selling and administration 28,375
Interest (Note 1) 2,880
Payment - bank loan (12/31) 12,000
Payment - accounts payable 10,400
Total 207,005

Exhibit 3

Other information relative to operations
1.) At the end of 2010, Copies Express owed $ 9,875 to suppliers for the purchase of photocopy supplies for which it had not yet paid.
2.) The yearly depreciation expense on the buildings and equipment was $ 15,000.
3.) At the end of 2010, Copies Express was owed $ 11,000 for copying services by customers who had not yet paid. Copies Express expected that all of these customers would pay within 30 days.
4.) An inventory taken of the supplies at year-end revealed that the year's cost of supplies was $60,250.
5.) Income taxes for 2010 were expected to be $ 11,593. They were unpaid as of December 31, 2010.

Questions

1. Prepare an income statement for 2010 and a balance sheet as of December 31, 2010.
2. Be prepared to explain the derivation of each number of these financial statements.