# Preperation-of-Accounts-Income-statement-v2

Document Sample

Sub: Accounts Topic: Preperation of Accounts

Question:

Preparation of Income statement and Balance Sheet.

ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in

Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.

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.

www.classof1.com

*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in

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 :

By registering with docstoc.com you agree to our