Merchandising Operations and the Accounting Cycle - Pearson

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