preparation of income statementmcminn retail

Question

Preparation of Income Statement.

McMinn Retail, Inc.

McMinn Retail, Inc., is a retailer that has engaged you to assist in the preparation on its financial statements at December 31, 2007. Following are the correct adjusted account balances, in alphabetical order, as of that date. Each balance is the "normal " balance for that account. (Hint: The "normal " balance is the same as the debit or credit side that increases the account.)

Accounts payable ...................................................................................................	$12,750
Accounts receivable .............................................................................................	2,600
Accumulated depreciation; office equipment ................................................	12,000
Additional paid-in capital (common stock) ......................................................	7,000
Bonds payable (due December 31, 2012) .........................................................	22,500
Cash .....................................................................................................................	15,200
Common stock (1,800 shares, $10 par value) ...................................................	18,000
Cost of goods sold ...................................................................................................	100,575
Deferred income taxes ..........................................................................................	5,750
Depreciation expense; office equipment ............................................................	2,750
Dividends declared ................................................................................................	5,000
Income tax expense ................................................................................................	8,190
Insurance expense ...................................................................................................	900
Land ......................................................................................................................	37,500
Merchandise inventory .......................................................................................	17,500
Notes payable (due December 31, 2008) ............................................................	2,500
Office equipment ...................................................................................................	41,000
Office supplies .........................................................................................................	900
Office supplies expense .......................................................................................	520
Preferred stock (250 shares, $20 par value) ......................................................	6,000
Premium on bonds payable ....................................................................................	1,750
Prepaid rent ..........................................................................................................	1,800
Rent expense ........................................................................................................	6,100
Retained earnings (January 2007) ........................................................................	21,050
Salaries expense .....................................................................................................	68,095
Sales ......................................................................................................................	226,000
Sales returns and allowances .................................................................................	2,500
Sales taxes payable ...............................................................................................	8,200
Treasury stock (200 common shares at cost) ......................................................	2,250
Utilities expense .....................................................................................................	4,120

Instructions
a. Prepare an income statement for the year ended December 31, 2007, which includes amounts for gross profit, income before income taxes, and net income. List expenses (other than cost of goods sold and income tax expense) in order, from the largest to the smallest dollar. You may ignore earnings per share.