Merchandising Operations and the Accounting Cycle - Pearson

Assets
Current assets:
Cash ...................................... $ 2,850
Accounts receivable............ 4,600
Note receivable ................... 8,000
Interest receivable............... 400
Inventory ............................. 40,200
Prepaid insurance............... 200
Supplies................................ 100
Total current assets ......... 56,350
Capital assets:
Furniture and fixtures........ $33,200
Less: Accumulated
amortization ................. 3,000 30,200
Total assets .............................. $86,550
AUSTIN SOUND CENTRE INC.
Income Statement
For the Year Ended December 31, 2004
Sales revenue ........................................................... $169,300)
Less: Sales discounts........................................... $ 1,400
Sales returns and allowances ................. 2,000 3,400)
Net sales revenue ............................................... $165,900)
Cost of goods sold:
Beginning inventory........................................... 38,600)
Purchases ............................................................. 91,400
Less: Purchase discounts ................................. $ 3,000
Purchase returns and allowances ......... 1,200 4,200
Net purchases ................................................... 87,200)
Freight in ........................................................... 5,200)
Cost of goods available for sale ........................ 131,000)
Less: Ending inventory.................................... 40,200)
Cost of goods sold .............................................. 90,800)
Gross margin............................................................. 75,100)
Operating expenses:
Wages expense .................................................... 10,200)
Rent expense........................................................ 8,400)
Insurance expense ............................................ 1,000)
Amortization expense—furniture ............... 600)
Supplies expense ............................................ 550) 20,750)
Income from operations ......................................... 54,350)
Other revenue and (expense):
Interest revenue................................................... 1,000)
Interest expense ................................................. (1,500) (500)
Net income ................................................................ $ 53,850)
AUSTIN SOUND CENTRE INC.
Statement of Retained Earnings
For the Year Ended December 31, 2004
Retained earnings, January 1, 2004 ..................................................................................... $15,900
Add: Net income.................................................................................................................... 53,850
69,750
Less: Dividends...................................................................................................................... 54,100
Retained earnings, December 31, 2004 ............................................................................... $15,650
AUSTIN SOUND CENTRE INC.
Balance Sheet
December 31, 2004
Liabilities
Current liabilities:
Accounts payable ......................... $47,000
Unearned sales revenue .............. 700
Wages payable .............................. 400
Interest payable............................. 200
Total current liabilities ............ 48,300
Long-term liability:
Note payable ................................ 12,600
Total liabilities ................................... 60,900
Shareholders’ Equity
Common stock ................................... 10,000
Retained earnings .............................. 15,650
Total shareholders’ equity....... 25,650
Total liabilities and
shareholders’ equity..................... $86,550
EXHIBIT 5S-6
Financial
Statements of
Austin Sound
Centre Inc.
Chapter Five Merchandising Operations and the Accounting Cycle 285