1.McGuire Corporation began operations in 2013. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2013, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year.
Cash receipts:
Sale of common stock................. $ 50,000
Collections from customers ............... 320,000
Borrowed from local bank on April 1, note signed requiringprincipal and interest at 12% to be paid on March 31, 2014 ... 40,000
Total cash receipts .................... $410,000
The Role of Accounting as an Information System
Cash disbursements:
Purchase of merchandise ............... $220,000
Payment of salaries ............... 80,000
Purchase of equipment ............... 30,000
Payment of rent on building ............... 14,000
Miscellaneous expenses ............... 10,000
Total cash disbursements ............... $354,000
You are called in to prepare financial statements at December 31, 2013. The following additional information was provided to you:
1. Customers owed the company $22,000 at year end.
2. At year end, $30,000 was still due to suppliers of merchandise purchased on credit.
3. At year end, merchandise inventory costing $50,000 still remained on hand.
4. Salaries owed to employees at year end amounted to $5,000.
5. On December 1, $3,000 in rent was paid to the owner of the building used by McGuire. This represented rent for the months of December through February.
6. The equipment, which has a 10 year life and no salvage value, was purchased on January 1, 2013. Straightline depreciation is used.
Required:
Prepare an income statement for 2013 and a balance sheet as of December 31, 2013.