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Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068
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Step 1 of 2
a.Solution approach: Prepare a T-account to determine the Cash account balance, and then review the results of the horizontal model representations (or journal entries above). Since there are a limited number of transactions in Problem 4.17., the balances of all of the other accounts should be easy to determine.
KISSICK, CO. |
|
Income Statement |
|
Sales | $ 910,000 |
Cost of goods sold | (580,000) |
Gross profit | $ 330,000 |
Rent expense | (120,000) |
Utilities expense | (36,000) |
Salaries expense | (380,000) |
Loss from operations | $(206,000) |
Interest expense | (60,000) |
Net loss (the problem ignores income taxes) | $(266,000) |
?
KISSICK, CO. |
|
Balance Sheet |
|
Assets: |
|
Cash | $1,029,000 |
Accounts receivable | 85,000 |
Merchandise inventory | 60,000 |
Total current assets | $1,174,000 |
Equipment (the problem ignores depreciation) | 150,000 |
Total assets | $1,324,000 |
|
|
Liabilities: |
|
Accounts payable | $ 20,000 |
Interest payable | 60,000 |
Rent payable | 10,000 |
Total current liabilities | $ 90,000 |
Notes payable | 500,000 |
Total liabilities | $ 590,000 |
|
|
Owners’ Equity: |
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Common stock | $1,000,000 |
Deficit * | (266,000) |
Total owners’ equity | $ 734,000 |
Total liabilities and owners’ equity | $1,324,000 |
Since this was the first year of operations, the Retained Earnings account would have a $0 beginning balance. Thus, the net loss for the year creates a deficit.
Step 2 of 2
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