Question

Following are the transactions and adjustments that occurred during the first year of operations at Kissick Co.

Issued 200,000 shares of $5-par-value common stock for $1,000,000 in cash.

Borrowed $550,000 from Oglesby National Bank and signed a 12% note due in three years.

Incurred and paid $410,000 in salaries for the year. Purchased $660,000 of merchandise inventory on account during the year.

Sold inventory costing $590,000 for a total of $910,000, all on credit.

Paid rent of $220,000 on the sales facilities during the first 11 months of the year.

Purchased $190,000 of store equipment, paying $55,000 in cash and agreeing to pay the difference within 90 days.

Paid the entire $135,000 owed for store equipment and $610,000 of the amount due to suppliers for credit purchases previously recorded.

Incurred and paid utilities expense of $37,000 during the year. Collected $845,000 in cash from customers during the year for credit sales previously recorded.

At year-end, accrued $66,000 of interest on the note due to Oglesby National Bank.

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.)

Answer 1

Income statement
Revenue	910000
Cost of goods sold	590000
	320000
Other expenses
Salary expense	410000
Rent	240000
Utilities Expenses	37000
Interest Expense	66000
Net Income	-433000

Liabilities	Amount	Assets	Amount
Common stock	1000000	Store Equipment	190000
Net loss	-433000
Notes Payable	550000	Cash	928000
		Inventory	70000
Accounts Payable
Interest Expense	66000	Accounts Receivable	65000
Rent Expense	20000
Inventory	50000
Total	1253000	Total	1253000