Question

Below are the transactions and adjustments that oocurred during the first year of operations at Kissick Co a. Issued 194,000 shares of S6-par-value common stock for $1,164,000 in cash. b. Borrowed $530,000 from Oglesby National Bank and signed a 11 % note due in three years. c. Incurred and paid $410,000 in salaries for the year d. Purchased $680,000 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 $110,000 on the sales facilities during the first 11 months of the year, g. Purchased $170,000 of store equipment, paying $52,000 in cash and agreeing to pay the difference within 90 days. h. Paid the entire $118,000 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 S825,000 in cash from customers during the year for credit sales previously recorded k. At year-end, accrued $58,300 of interest on the note due to Oglesby National Bank I. At year-end, accrued $10,000 of past-due December rent on the sales facilities. 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 helpfui to prepare T-accounts for each account affected by the transa KISSICK co.

Answer 1

	KISSICK Co.
	Income Statement
	Sales		$   9,20,000
Less:	Cost of goods sold		$   5,80,000
	Gross Profit		$   3,40,000
Less:	Selling and administrative expenses
	Salaries Expense	$   4,10,000
	Rent expense ($110000+10000)	$   1,20,000
	Utilities expense	$       36,000
	Interest expense	$       58,300	$   6,24,300
	Net Income (loss)		$ -2,84,300
	KISSICK Co.
	Balance Sheet
	Assets :
	Current assets
	Cash*	$ 11,83,000
	Accounts receivable ($920000-$825000)	$       95,000
	Merchandise Inventory ($680000-$580000)	$   1,00,000
	Total Current assets		$ 13,78,000
	Property Plant and Equipment
	Equipment		$   1,70,000
	Total assets		$ 15,48,000
	Liabilities and Stock holder's Equity :
	Current Liabilities
	Accounts payable ($680000-$610000)	$       70,000
	Interest Payable	$       58,300
	Rent Payable	$       10,000
	Total Current Liabilities		$   1,38,300
	Long term Liabilities
	Notes Payable		$   5,30,000
	Stock holder's Equity
	Common stock, $6 par, 194000 shares issued and outstanding	$ 11,64,000
	Retained Earnings (balancing figure)	$ -2,84,300
	Total Stock holder's Equity		$   8,79,700
	Total Liabilities and Stock holder's Equity		$ 15,48,000
	*Cash:
	(1164000 + 530000 - 410000 - 110000 - 52000 - 118000 - 610000 - 36000 + 825000) = 1183000