Since 2004, Mary Anne Spier has been designing, producing and selling unique handcrafted goods. She began by selling her products to a small number of specialty retailers. Then, in 2013, she opened her own retail store and started selling directly to customers. Spier incorporated the business as MAS Inc. on January 1, 2018, with an initial stock issue of 2,000 shares of common stock at a par value of $3.50 per share. Mary Anne is the principal stockholder of MAS Inc.

Sales have increased steadily each year since operations began at the retail location, and Spier feels that the purchase of a specialized computer system is needed to accommodate continued growth. Spier wishes to finance the purchase of the system through a long-termnote from a commercial bank. In support of Spiers loan request, the Last National Bankasked her to submit an income statement for MAS Inc. for the first five months of 2018 and a balance sheet as of May 31, 2018.

Spier assembled the following information from the cash basis records of the corporation for use in preparing the financial statements requested by the bank

Collections on credit sales

4. Customer records showed uncollected sales of $3,870 at May 31, 2018. MAS expects to collect these amounts in the future.

5. Finished goods with a cost of $1,840 were available for sale on May 31, 2018, and unused materials costing $230 were also on hand. There were no goods in process at that date. No materials were on hand or in process and no finished goods were on hand at January 1, 2018.

6. The note evidencing the 3-year bank loan is dated January 1, 2018, and states a simple interest rate of 10%. The loan requires quarterly payments on April 1, July 1, October 1, and January 1 consisting of equal principal payments plus accrued interest since the last payment.

7. Mary Anne Spier receives a salary of $900 on the last day of each month. Her two part-time employees have been paid through May 25, 2018, and were due an additional $240 on May 31, 2018.

8. Furniture and fixtures costing $3,000 were purchased on January 2, 2018, and have an estimated useful life of 5 years and a salvage value of $600. These are the only fixed assets currently used in the business. Straight-line depreciation is to be used for book purposes.

9. Rent was paid for 9 months in advance on January 2, 2018.

10. A one-year insurance policy was purchased on January 2, 2018.

11. MAS Inc. is subject to an income tax rate of 25%.

12. Payments and collections pertaining to the unincorporated business through December 31, 2017, were not included in the records of the corporation, and no cash was transferred from the unincorporated business to the corporation.

Instructions: 50 points

Using the accrual basis of accounting, prepare for MAS Inc. an Excel spreadsheet that presents:

1. (1) A multiple-step income statement for the 5 months ended May 31, 2018. (For the sake of simplicity, in calculating COGS, you need only include the cost of materials and finished goods inventory; do not attempt to include labor and overhead costs.)

2. (2) A classified balance sheet as of May 31, 2018.

For maximum credit, please provide any supporting calculations for the amounts presented

in the financial statements.

1. The check register showed the following 2018 deposits through May 31. Sales of common stock Cash sales Collections on credit sales Bank loan proceeds 7,000 23,770 5,320 3,600 $39,690 2. The following amounts were disbursed through May 31, 2018 Materials (used in producing goods) Rent Salaries and wages Maintenance Utilities Insurance premium Furniture and fixtures Principal and interest payment on bank loan Advertising $14,400 2,340 6,500 110 2,800 3,300 3,000 390 424 $33,264 3. Unpaid invoices at May 31, 2018, were as follows. Materials (used in producing goods) Utilities $ 265 270