Instructions
1. Prepare a single-step income statement in the format shown in Exhibit 9.
2. Prepare a statement of owner’s equity.
3. Prepare an account form of balance sheet, assuming that the current portion of the note payable is $16,000.
4. Prepare closing entries as of August 31, 2014.
Answer:
1.
GLOUCESTER CO.
Income Statement
For the Year Ended August 31, 2014
Revenues:
Net sales $4,517,000
Expenses:
Cost of merchandise sold $2,650,000
Selling expenses 1,008,000
Administrative expenses 537,000
Interest expense 12,000
Total expenses 4,207,000
Net income $ 310,000
2.
GLOUCESTER CO.
Statement of Owner’s Equity
For the Year Ended August 31, 2014
Mia Reynolds, capital, September 1, 2013 $675,000
Net income for the year $310,000
Less withdrawals 75,000
Increase in owner’s equity 235,000
Mia Reynolds, capital, August 31, 2014 $910,000
3.
GLOUCESTER CO.
Balance Sheet
August 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $125,000 Accounts payable $193,000
Accounts receivable 335,000 Salaries payable 12,000
Merchandise inventory 380,000 Notes payable (current portion) 16,000
Office supplies 12,000 Total current liabilities $ 221,000
Prepaid insurance 9,000 Long-term liabilities:
Total current assets $ 861,000 Notes payable (final payment
Property, plant, and equipment: due 2037) 384,000
Office equipment $275,000 Total liabilities $ 605,000
Less accumulated depreciation 187,000 $ 88,000 Owner’s Equity
Store equipment $859,000 Mia Reynolds, capital 910,000
Less accumulated depreciation 293,000 566,000
Total property, plant, and
equipment 654,000
Total assets $1,515,000 Total liabilities and owner’s equity $1,515,000
4.
2014 Closing Entries
Aug. 31 Sales 4,576,000
Income Summary 4,576,000
31 Income Summary 4,266,000
Sales Returns and Allowances 31,000
Sales Discounts 28,000
Cost of Merchandise Sold 2,650,000
Sales Salaries Expense 745,000
Advertising Expense 205,000
Depreciation Expense—Store Equipment 40,000
Miscellaneous Selling Expense 18,000
Office Salaries Expense 410,000
Rent Expense 60,000
Depreciation Expense—Office Equipment 30,000
Insurance Expense 18,000
Office Supplies Expense 11,000
Miscellaneous Administrative Expense 8,000
Interest Expense 12,000
31 Income Summary 310,000
Mia Reynolds, Capital 310,000
31 Mia Reynolds, Capital 75,000
Mia Reynolds, Drawing 75,000