Question
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, 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 requiring | |||
principal and interest at 12% to be paid on March 31, 2019 | 40,000 | ||
Total cash receipts | $ | 410,000 | |
Cash disbursements: | |||
Purchase of merchandise | $ | 220,000 | |
Payment of salaries and wages | 80,000 | ||
Purchase of office 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, 2018. The following additional information was provided to you:
Customers owed the company $22,000 at year-end.
At year-end, $30,000 was still due to suppliers of merchandise purchased on credit.
At year-end, merchandise inventory costing $50,000 still remained on hand.
Salaries and wages owed to employees at year-end amounted to $5,000.
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.
The office equipment, which has a 10-year life and no salvage value, was purchased on January 1, 2018. Straight-line depreciation is used.
Required:
Prepare the income statement for 2018 and a balance sheet as of December 31, 2018.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started