Record Transactions and Prepare and Income Statement and Balance Sheet for Kissick Co.
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Record transactions.
Use the horizontal model, or write the journal entry, for each of the following transactions that occurred during the first year of operations at Kissick Co.
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.
Prepare an income statement and balance sheet from transaction data.
a. Based on your answers to Problem 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.)
b. Provide a brief written evaluation of Kissick Co.'s results from operations for the year and its financial position at the end of the year. In your opinion, what are the likely explanations for the company's net loss?
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Solution Summary
This solution provides the journalized transaction records and the income and balance sheet in an attached Word and Excel document. A brief written discussion is also included.
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