Question

XOS Corporation (XOS) sells accounting-related memorabilia at a small store. The company was organized and began operations on January 1, 2016.

Events During January, 2016:

1. On January 1, the owner invested $100,000 cash in the company, receiving 1,000 shares of $2 par value common stock in exchange.

2. On January 1, XOS purchased furniture and fixtures for $30,000. Paid $5,000 cash down, and signed a promissory note with a 12% annual rate of interest for the balance of the purchase price. Note plus interest to be paid in 2 years.

3. On January 1, XOS paid two months rent in advance to mall owners for floor space, $6,000.

4. On January 1, XOS paid a one-year premium for liability and casualty insurance, $1,200.

5. During January, the company purchased merchandise inventory on account for $25,000.

6. During January, sales totaled $48,000 ($28,000 for cash and $20,000 on credit). The cost of the merchandise sold was $20,000. XOS uses a perpetual inventory system.

7. During January, the company paid wages totaling $3,000.

8. During January, payments on account to suppliers of inventory totaled $9,000.

9. During January, a customer ordered 100 custom-made t-shirts saying “SOX ROX!”-for delivery in February, 2016. XOS required payment in advance ($1,000) for the entire order.

10. During January, customers paid $10,000 to XOS for sales made on credit

Additional Information:

• The furniture and fixtures have an expected useful life of 5 years and zero expected salvage value.   XOS uses the straight-line method of depreciation.
• At January 31, employees have earned wages of $1,000 that will not be paid until February.
• Utilities charges for January are estimated to be $600. However, the utilities bill will not be received and paid until mid-February.

Question:

3. Prepare an unclassified Balance Sheet and Statement of Retained Earnings as of January 31, a single-step Income Statement, and a Statement of Cash Flows (Direct Method) for the month ended January 31.

4. Prepare any necessary closing journal entries at January 31. Then prepare a post-closing trial balance.

Answer 1

Income Statement for January
Revenue
sales	48000
Expense
Interest payable	250
Premium	1200
Purchase Merch.	25000
wages	3000
Depreciation	500
wages payable	1000
utility charges	600
	31550
Profit	16450

Balance Sheet as on 31st January
Liability	Amount	Asset	Amount
Equity	2000	furniture	29500
Premium	98000	advance	6000
Promissery note	25000	Debtors	10000
Interest due	250	cash	114800
creditor	16000
advance	1000
wages due	1000
utility charges due	600
Profit	16450
Total	160300		160300

Cash Flow Statement
Direct Method
Cash Flow from Operating activities
Cash receipt from customer	38000
cash paid to supplier	-9000
cash paid to employees	-3000
advance from customer	1000
Rent	-6000
Premium	-1200
Net cash from operating activity	19800
Cash flow from Investing activity
Purchase asset	-5000
Net cash from investing activity	-5000
Cash Flow from financing activity
Equity	2000
Premium	98000
Net cash from financing activity	100000
Net increase or decrease in cash	114800
Opening cash	0
Cash at end of period	114800