Question

Following are the transactions and adjustments that occurred during the first year of operations at Kissick Co. a. Issued 199,000 shares of $6-par-value common stock for $1,194,000 in cash. b. Borrowed $520,000 from Oglesby National Bank and signed a 11% note due in three years. c. Incurred and paid $390,000 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 $900,000, all on credit. f. Paid rent of $220,000 on the sales facilities during the first 11 months of the year. g. Purchased $180,000 of store equipment, paying $53,000 in cash and agreeing to pay the difference within 90 days. h. Paid the entire $127,000 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 $37,000 during the year. j. Collected $835,000 in cash from customers during the year for credit sales previously recorded. k. At year-end, accrued $57,200 of interest on the note due to Oglesby National Bank. I. At year-end, accrued $20,000 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 a T-account for the Cash account since it is affected by most of the transactions.) Complete this question by entering your answers in the tabs below. Required A1 Required A2 Prepare an income statement (ignoring income taxes) for Kissick Co.'s first year of operations as of the end of the year. (Hint: You may find it helpful to prepare a T-account for the Cash account since it is affected by most of the transactions.) KISSICK CO. Income Statement

Answer 1

Requirement A1:

KISSICK CO.
Income Statement
Revenues:
Sales revenue		$900,000
Expenses:
Cost of goods sold	$580,000
Salaries expense	$390,000
Rent expense	$240,000
Utilities expense	$37,000
Interest expense	$57,200
Total Expenses		$1,304,200
Net Income (loss)		($404,200)

Requirement A2:

KISSICK CO.
Balance Sheet
Assets		Liabilities and stockholder's equity
Cash	$1,102,000	Accounts payable	$70,000
Merchandise inventory	$110,000	Interest payable	$57,200
Accounts receivable	$65,000	Rent payable	$20,000
Store equipment	$180,000	Notes payable	$520,000
		Stockholder's Equity:
		Common stock	$1,194,000
		Retained Earnings	($404,200)
Total Assets	$1,457,000	Total liabilities and stockholder's equity	$1,457,000

Calculations: T-Accounts

Cash			Accounts payable
$1,194,000	$390,000		$127,000	$690,000
$520,000	$220,000		$620,000	$127,000
$835,000	$53,000			Bal. $70,000
	$37,000
	$127,000		Rent Expense
	$690,000		$220,000
Bal. $1,102,000			$20,000
			Bal. $240,000
Merchandise inventory
$690,000	$580,000
Bal. $110,000
Accounts receivable
$900,000	$835,000
Bal. $65,000