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McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year.
| Cash receipts: | |||
| Sale of common stock | $ | 67,500 | |
| Collections from customers | 320,000 | ||
| Borrowed from local bank on April 1, note signed requiring | |||
| principal and interest at 12% to be paid on March 31, 2019 | 34,000 | ||
| Total cash receipts | $ | 421,500 | |
| Cash disbursements: | |||
| Purchase of merchandise | $ | 195,000 | |
| Payment of salaries and wages | 76,000 | ||
| Purchase of office equipment | 40,500 | ||
| Payment of rent on building | 10,500 | ||
| Miscellaneous expenses | 12,200 | ||
| Total cash disbursements | $ | 334,200 | |
You are called in to prepare financial statements at December 31, 2018. The following additional information was provided to you:
Customers owed the company $19,000 at year-end.
At year-end, $29,400 was still due to suppliers of merchandise purchased on credit.
At year-end, merchandise inventory costing $46,400 still remained on hand.
Salaries and wages owed to employees at year-end amounted to $5,100.
On December 1, $3,150 in rent was paid to the owner of the building used by McGuire. This represented rent for the months of December through February.
The office equipment, which has a 10-year life and no salvage value, was purchased on January 1, 2018. Straight-line depreciation is used.
Required:
Prepare an income statement for 2018 and a balance sheet as of December 31, 2018. (For Balance Sheet only, items to be deducted must be indicated with a negative amount.)
Expert Answer
| Income Statement | ||
| Sales (320000+19000) | 339000 | |
| Less: cost of Good sold | 178000 | |
| (195000+29400-46400) | ||
| Gross profit | 161000 | |
| Less: Operating expenses | ||
| Salaries & wages expenses (76000+5100) | 81100 | |
| Rent expenses 10500-(3150/3*2) | 8400 | |
| Miscelleneous expenses | 12200 | |
| Depreciation expenses (40500/10) | 4050 | |
| Total Operating expenses | 105750 | |
| Net Operating Income | 55250 | |
| Less: interest expenses (34000*12%*9/12) | 3060 | |
| Net Income | 52190 | |
| Balance Sheet | ||
| Assets | ||
| Current Assets | ||
| Cash (421500-334200) | 87300 | |
| Accounts Receivable | $19,000 | |
| Inventory | $46,400 | |
| Prepaid rent (3150/3*2) | $2,100 | |
| Total Current Assets | $154,800 | |
| Property Plant & equipment | ||
| Office Equipment | $40,500 | |
| Less: | ||
| Accumulated Depreciation-Equipment | $4,050 | $36,450 |
| Total assets | $191,250 | |
| Liabilities & stockholder Equity | ||
| Current liabilities | ||
| Accounts Payable | $29,400 | |
| Salaries & wages payable | $5,100 | |
| Interest payable | $3,060 | |
| Notes Payable | 34000 | |
| Total current liabilities | $71,560 | |
| Stockholder Equity | ||
| Common stock | 67500 | |
| Retained Eranings | $52,190 | |
| Total Stockholder Equity | $119,690 | |
| Total Liabilities & stockholder Equity | $191,250 | |
