Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 83

Prepare an income statement and balance sheet from transaction data

a. Based on your answers to Problem 4.17, 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 T-accounts for each account affected by the transactions.)

---

b. Provide a brief written evaluation of Kissick Co.’s results from operations for the year and its financial position at the end of the year. In your opinion, what are the likely explanations for the company’s net loss?

Step 1 of 6

Prepare the balance sheet of K Co at the end of its first year operations

K Co
Balance sheet
At the end of first year
Particulars	Amount	Amount
Assets
Current assets
Cash	$1,029,000
Inventory	$60,000
Accounts receivable	$85,000
Total current assets		$1,174,000
Fixed assets
Store equipment		$150,000
Total assets		$1,324,000
Liabilities and Stockholders' equity
Current liabilities
Accounts payable	$20,000
Rent payable (one month rent)	$10,000	$30,000
Note payable	$500,000
Add: Accrued interest	$60,000	$560,000
Total liabilities		$590,000
Stockholders' equity
Common stock	$1,000,000
Less: Retained earnings (Net loss)	$266,000
Total stockholders' equity		$734,000
Total liabilities and stockholders' equity		$1,324,000