Marie has prepared baked goods for sale since 1998. She started a baking business in her home and has been operating in a rented building with a storefront since 2003. Marie incorporated the business as Cranberry Inc. on January 1, 2017, with an initial share issue of 1,000 common shares for $2,500. Marie is the principal shareholder of Cranberry Inc. Sales have increased by 30% annually since operations began at the present location, and additional equipment is needed for the continued growth that is expected. Marie wants to purchase some additional baking equipment and to finance the equipment through a long-term note from a commercial bank. Liberal Bank & Trust has asked Marie to submit a statement of income for Cranberry Inc. for the first five months of 2017 and a statement of financial position as at May 31, 2017. Marie assembled the following information from the corporation's cash basis records to use in preparing the financial statements that the bank wants to see:

1.

The bank statement showed the following 2017 deposits through May 31:

Sale of common shares		$ 2,500
Cash sales		22,770
Rebates from purchases		130
Collections on credit sales		5,320
Bank loan proceeds		2,880
		$33,600

2.

The following amounts were disbursed through May 31, 2017:

Baking materials		$14,400
Rent		1,800
Salaries and wages		5,500
Maintenance		110
Utilities		4,000
Insurance premium		1,920
Display cases and equipment		3,600
Principal and interest payment on bank loan		312
Advertising		424
		$32,066

3.

Unpaid invoices at May 31, 2017, were as follows:

Baking materials	$256
Utilities	270
	$526

4.

Accounts receivable records showed uncollected sales of $5,306 at May 31, 2017.

5.

Baking materials costing $2,140 were on hand at May 31, 2017. There were no materials in process or finished goods on hand at that date. No materials were on hand or in process and no finished goods were on hand at January 1, 2017.

6.

The note for the three-year bank loan is dated January 1, 2017, and states a simple interest rate of 10%. The loan requires quarterly payments on April 1, July 1, October 1, and January 1. Each payment is to consist of equal principal payments [$2,880 (3 4) = $240] plus accrued interest since the last payment.

7.

Marie receives a salary of $750 on the last day of each month. The other employees have been paid through May 25, 2017, and are due an additional $270 on May 31, 2017.

8.

New display cases and equipment costing $3,600 were purchased on January 2, 2017, and have an estimated useful life of five years with no residual value. These are the only fixed assets that are currently used in the business. Straight-line depreciation is used for book purposes.

9.

Rent was paid for six months in advance on January 2, 2017.

10.

A one-year insurance policy was purchased on January 2, 2017.

11.

Cranberry Inc. is subject to an income tax rate of 20%. No tax installments have been paid.

12. Payments and collections from the unincorporated business through December 31, 2016, were not included in the corporation's records, and no cash was transferred from the unincorporated business to the corporation.

Use the accrual basis of accounting, to prepare a statement of income for the five months ended May 31, 2017

CRANBERRY INC.

Income Statement