Record transactions (Journal Entries) & Calculate net income
1. Calculate operating income and net income. The attached information is available
from the accounting records of Spenser Co. for the year ended December 31, 2004. Use gross profit ratio to calculate inventory loss
2. 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 2, 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?
https://brainmass.com/business/journal-entries/record-transactions-journal-entries-calculate-net-income-24735
Solution Preview
See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks
1. Calculate operating income and net income. The following information is available
from the accounting records of Spenser Co. for the year ended December 31, 2004:
Selling, general, and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000
Extraordinary gain from early retirement of bonds,
net of tax expense of $28,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,000
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,000
Loss from discontinued operations net of tax savings of $5,000 . . . . . . . . . . . . . . . . 16,000
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,000
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579,000
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000
Net cash provided by operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272,000
Required:
a. Calculate the operating income for Spenser Co. for the year ended December
31, 2004.
b. Calculate the company's net income for 2004.
c. prepare an income statement in good form. (Net income=$169,000).
Use gross profit ratio to calculate inventory loss. Franklin
Multi-Step Income Statement Spenser Company
For the year ending on 31st Dec. 2004
Expenses Revenue.
Revenues Sales 579,000
Cost of goods sold 272,000
Gross Profit on sales 307,000
Operating Expenses
Selling, General and Administrative Expenses 51,000
R&D Expenses 37,000
Interest Expenses 64,000
Total Operating expenses 152,000
Operating Profit 155,000
Other Income (Net of Taxes) 104,000
Other expenses (Net of ...
Solution Summary
This post answers the two basic accounting questions. The first problem illustrates how to calculate the operating income and net income from the accounting records of the company. The second problem shows how to record the journal entries for a variety of transactions made by the company. The T-accounts are also shown.