Merchandising Operations and the Accounting Cycle - Pearson
Merchandising Operations and the Accounting Cycle - Pearson
Merchandising Operations and the Accounting Cycle - Pearson
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Requirement 3<br />
292 Part One The Basic Structure of <strong>Accounting</strong><br />
JAN KING DISTRIBUTING COMPANY LTD.<br />
Income Statement<br />
For <strong>the</strong> Year Ended December 31, 2003<br />
Sales revenue............................................................. $347,800<br />
Less: Sales discounts........................................... $ 10,300<br />
Sales returns <strong>and</strong> allowances................... 8,200 18,500<br />
Net sales revenue ................................................ $329,300<br />
Cost of goods sold:<br />
Beginning inventory ........................................... 60,500<br />
Purchases.............................................................. 175,900<br />
Less: Purchase discounts................................... $6,000<br />
Purchase returns <strong>and</strong> allowances........... 7,430 13,430<br />
Net purchases ...................................................... 162,470<br />
Freight in .............................................................. 9,300<br />
Cost of goods available for sale ........................ 232,270<br />
Less: Ending inventory...................................... 65,800<br />
Cost of goods sold............................................... 166,470<br />
Gross margin............................................................. 162,830<br />
Operating expenses:<br />
Salary expense ..................................................... 84,050<br />
Rent expense ........................................................ 12,000<br />
Utilities expense .................................................. 5,800<br />
Amortization expense—furniture .................... 2,650<br />
Supplies expense ................................................. 2,580 107,080<br />
Income from operations .......................................... 55,750<br />
O<strong>the</strong>r expense:<br />
Interest expense................................................... 3,500<br />
Net income ................................................................ $ 52,250<br />
JAN KING DISTRIBUTING COMPANY LTD.<br />
Statement of Retained Earnings<br />
For <strong>the</strong> Year Ended December 31, 2003<br />
Retained Earnings, January 1, 2003........................................................................... $13,680<br />
Add: Net income.......................................................................................................... 52,250<br />
65,930<br />
Less: Dividends............................................................................................................ 48,000<br />
Retained Earnings, December 31, 2003..................................................................... $17,930<br />
Assets<br />
Current assets:<br />
Cash................................ $ 5,670<br />
Accounts receivable..... 37,100<br />
Inventory....................... 65,800<br />
Supplies ......................... 1,350<br />
Prepaid rent .................. 1,000<br />
Total current assets.... 110,920<br />
Capital assets:<br />
Furniture ....................... $26,500<br />
Less: Accumulated<br />
amortization .... 23,850 2,650<br />
Total assets.......................... $113,570<br />
JAN KING DISTRIBUTING COMPANY LTD.<br />
Balance Sheet<br />
December 31, 2003<br />
Liabilities<br />
Current liabilities:<br />
Accounts payable................... $ 46,340<br />
Salary payable ........................ 1,300<br />
Interest payable...................... 600<br />
Unearned sales revenue........ 2,400<br />
Total current liabilities....... 50,640<br />
Long-term note payable ............. 35,000<br />
Total liabilities..............................<br />
Shareholders’ Equity<br />
85,640<br />
Common stock............................. 10,000<br />
Retained earnings........................ 17,930<br />
Total shareholders’ equity 27,930<br />
Total liabilities <strong>and</strong><br />
shareholders’ equity .............. $113,570