Question

Below are the transactions and adjustments that occurred during the first year of operations at Kissick Co a. Issued 197,000 shares of $6-par-value common stock for $1,182,000 in cash. b. Borrowed $520,000 from Oglesby National Bank and signed a 10% note due in three years c. Incurred and paid $380,000 in salaries for the year d. Purchased $690,000 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 $330,000 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 $600,000 of the amount due to suppliers for credit purchases previously recorded i. Incurred and paid utilities expense of $34,000 during the year j. Collected $835,000 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. l. At year-end, accrued $30,000 of past-due December rent on the sales facilities. Required a. 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.) KISSICK CO Income Statement t of goods sold Gross profit alaries expense nt expense tilities expense 0 0 oss from operations expense t loss

Answer 1

Req a:
Income statement:
Sales revenue				910000
Less: Cost of goods sold				580000
Gross Profit				330000
Less: Operating expense
Salaries			380000
Rent expenses (330000+30000)			360000
Utilities expenses			34000
Interest on Notes payable			52000
Total Operating expense				826000
Net loss				-496000
Req b:
Ending Cash balance:
Receipts:
Issue of Share			1182000
Borrowing from Oglesby			520000
Collections from Customers			835000
Total Receipts				2537000
Payments:
paid for salaries			380000
paid for rent expenses			330000
paid to Accounts payable			728000
(128000+600000)
Paid for Utilities			34000
Paiad for equipment			52000
Total Payment				1524000
Ending balance of Cash				1013000
(2157000-1306000)
Ending Accounts receivable balance:
Sales revenue on credit			910000
less: Amount received			835000
Ending Accounts receivable balance:			75000
Ending Inventory account balance:
Purchase of inventory			690000
less: Cost of goods sold			580000
Ending Inventory account balance:			110000
Balance of Accounts Payable:
Purchase of Inventory on credit				690000
Less: payment made for the same				600000
ending balance of Accounts payable				90000
Balance Sheet:
Assets:
Cash			1013000
Accounts receivable			75000
Merchandise invventory			110000
Total Current assets			1198000
Equipment			180000
Total Assets			1378000
Liabilities;
Accounts payable			90000
Rent Payable			30000
Interest payable			52000
Total Current liabilities			172000
Notes Payable			520000
Total Liabilities			692000
Stockholder's equity:
Common Stock			1182000
Deficit			-496000
Total Stockholder's equity			686000
Total Liabilities and Equity			1378000