Preparation of Income statement and Balance Sheet.
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.
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.