Problem:
Prepare an income statement for Packer, Inc. for 2013, and a balance sheet as of December 31, 2013. Case study is given below:
Packer, Inc. was formed on January 2, 2013. Joe Lombardi contributed $40,000 cash in exchange for all 1,000 shares of stock. The same day, Packer signed a lease on office space at a rent of $1,200/month. The company paid the landlord $26,400 rent in advance.
On February 1, Packer purchased a computer system for $7,200 cash. The same day, the company bought office furniture for $9,000 on account. On March 1, when the account was due, Packer borrowed the funds to pay it on a 3-year note from Starr National Bank, at an annual interest rate of 7% [Note: for simplicity, treat each month as 1/12 of a year]. The first interest payment was not due until March 1 of 2014. The computer system is depreciated over three years (36 months) and the office furniture over six years (72 months).
During 2013, Packer billed customers $129,740 for services performed. All of this was collected in cash except for $24,300. Lombardi estimates that 90% of the outstanding accounts will eventually be collected, but it is not known which ones.
In March, Packer purchased $1,600 of office supplies, of which $230 were still on hand at the end of the year. On April 1, Packer paid a publisher $2,800 for twelve months worth of advertising in a local "shopper" newspaper. Utilities expense for the year was $8,750; the December utilities bills of $780 was received in December but not paid until January. Salary expense for the year for Lombardi and a secretary amounted to $72,540. The December payroll of $7,210 was paid the first week of January [Note: for simplicity, payroll taxes and withholding are ignored]. Income taxes are 20% of income before taxes, due in March of 2014.
Prepare an income statement for Packer, Inc. for 2013, and a balance sheet as of December 31, 2013.