Preperation-of-Accounts-Income-statement-v2

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					              Sub: Accounts                                                        Topic: Preperation of Accounts


              Question:

              Preparation of Income statement and Balance Sheet.

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              Financial Data for 2008

                   1. Sales for the year, all on account, were $221,632.

                   2. Cash collected from customers on account, $219,514

                   3. Purchases of merchandise were $132,500, of which $12,425 had not been paid by the
                        end of the year

                   4. Operating expenses of the current year, paid in cash, were $57,394. In addition, $1,575
                        of such expenses were incurred but not paid by the end of the year.

                   5. Rent paid in cash during the year was $7,800, of which $6,000 related to 2008, and the
                        remainder to 2009. This payment is not included in #4 above.

                   6. Accounts receivable of $1,950 was written off as uncollectible.

                   7. Beginning accounts payable were paid.

                   8. A cash dividend of $2,500 was paid to the shareholders during the year.

                   9. Prepaid rent at 12/31/07 was for January and February of 2008.




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              Sub: Accounts                                                        Topic: Preperation of Accounts


                   10. As a result of the physical inventory, it was determined that inventory on hand at
                        12/31/08 was $27,500.

                   11. Based on an aging of the accounts receivable, it was determined that the allowance for
                        bad debts at 12/31/08 should be $1,100.

                   12. Depreciation expense for the year is $2,700 (classified as an operating expense).

                   13. The note payable bears simple interest at 8% annually. Interest for 2008 is due January
                        3, 2009.

                   14. Income tax expense is 20% of net income before taxes. These taxes are payable March
                        15, 2009.




              Solution:




              Item             Effects on the Income Accounts and Balance Sheet Accounts

              1      Whole amount Debit Accounts receivable & Credit sales : 
				
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Description: Preparation of Income statement and Balance Sheet.
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