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 $7,000.
4. Prepare closing entries as of June 30, 2014.
Answer:
1.
KANPUR CO.
Income Statement
For the Year Ended June 30, 2014
Revenues:
Net sales $8,925,000
Expenses:
Cost of merchandise sold $5,620,000
Selling expenses 1,321,000
Administrative expenses 632,000
Interest expense 12,000
Total expenses 7,585,000
Net income $1,340,000
2.
KANPUR CO.
Statement of Owner’s Equity
For the Year Ended June 30, 2014
Gerri Faber, capital, July 1, 2013 $ 431,000
Net income for the year $1,340,000
Less withdrawals 300,000
Increase in owner’s equity 1,040,000
Gerri Faber, capital, June 30, 2014 $1,471,000
3.
KANPUR CO.
Balance Sheet
June 30, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $ 92,000 Accounts payable $48,500
Accounts receivable 450,000 Salaries payable 4,000
Merchandise inventory 375,000 Notes payable (current portion) 7,000
Office supplies 10,000 Total current liabilities $ 59,500
Prepaid insurance 12,000 Long-term liabilities:
Total current assets $ 939,000 Notes payable (final payment
Property, plant, and equipment: due 2032) 133,000
Office equipment $220,000 Total liabilities $ 192,500
Less accum. depreciation 58,000 $162,000 Owner’s Equity
Store equipment $650,000 Gerri Faber, capital 1,471,000
Less accum. depreciation 87,500 562,500
Total property, plant, and
equipment 724,500
Total assets $1,663,500 Total liabilities and owner’s equity $1,663,500
4.
2014 Closing Entries
June 30 Sales 9,175,000
Income Summary 9,175,000
30 Income Summary 7,835,000
Sales Returns and Allowances 160,000
Sales Discounts 90,000
Cost of Merchandise Sold 5,620,000
Sales Salaries Expense 850,000
Advertising Expense 420,000
Depreciation Expense—Store Equipment 33,000
Miscellaneous Selling Expense 18,000
Office Salaries Expense 540,000
Rent Expense 48,000
Insurance Expense 24,000
Depreciation Expense—Office Equipment 10,000
Office Supplies Expense 4,000
Miscellaneous Administrative Expense 6,000
Interest Expense 12,000
30 Income Summary 1,340,000
Gerri Faber, Capital 1,340,000
30 Gerri Faber, Capital 300,000
Gerri Faber, Drawing 300,000