Question

Following are the transactions and adjustments that occurred during the first year of operations at Kissick Co. a. Issued 191,000 shares of $4-par-value common stock for $764,000 in cash. b. Borrowed $540,000 from Oglesby National Bank and signed a 11% note due in three years. c. Incurred and paid $400,000 in salaries for the year. d. Purchased $670,000 of merchandise inventory on account during the year e. Sold inventory costing $580,000 for a total of $920,000, 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 $51,000 in cash and agreeing to pay the difference within 90 days. h. Paid the entire $129,000 owed for store equipment and $610,000 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 $845,000 in cash from customers during the year for credit sales previously recorded. k. At year-end, accrued $59,400 of interest on the note due to Oglesby National Bank. 1. At year-end, accrued $30,000 of past-due December rent on the sales facilities.

Answer 1

Answer - Preparation of Income Statements during the first_year_of |_operations kissick Company Bre v Income Stalement I el Particylars Amt.(5) Aml-($) I Sales of a 920000 |- Cost of Goods sold |(580000) __ Gross Profit 340000 - Rent Expense (330000 + 30000) (360000) |-: Quilities Expense 36000) |-: Salaries Expense (400000) Loss from operations Interest Expense |(456000) (59400) - Net Loss |(515400) 2. Preparation of Balance Sheet during the first year of operations kissick Company Balance Sheet Amt. Antt.($) Perbiculars Assets ; Current ASEKS Cash (working Note 1) Accounts Receivable (920000 - 845000) 599000 75000

90000 | Mercaglipe Invegbowy (670000 - 580ovo) Total Current Assek (qb+c) 758000 Property Plent and Equipment 180000 Equipment Total Assets (2+3) 938000 n Ligbilities Current liabilities Accounts Payable (670000 - 519000) Interest Payable Rent Payable Coooo 59400 30000 Total cureat Libilities (etfty) L 149.400 Non Current Liabilitter - Notes Pafeble 540000 689400 Total cibilities (617) Stockholders fqully common Stock (191000 shares x $4) 4764000 | cocte Deficit / Net Loss |(515400 Tota) Stockholder's Equity (9+10) 248600 938000 Total liabilities and stockholder's Equity 18+ID

Amics 400.000 Working Notes I Cast Account Cash Account Paliwagus | Ami B I particulars | To Common Shah__ 764000|0y Salaries To Notes Payable | 540000 | 4 Renk To Account Receivable | 845000 | Store Equipment (51000 129000 By_Accouglas Payable dy uhlities Expenie 330000 H80.000 610000 36000 (by Balence old SIDOL | 2149000 2149000 2. Rent Expenre Total Rent Expenie : Rent Expenve + Rent Pyable 330000 + 39000:-- $360000 Accoughs Receivable Accounts Receivables : Gellt Sales - Payment Receivel 920000 - 845000 = $ 75000 14. Merchandise Inventory _with Merchandise Jouenbory 3 • Purchases - cat of Goods sold Godoo - S80000 . $ 90000 5. Account Payable Accounts Payable : Credit Purchquer - Payment mate 670000 - 610000 = $60000