Question
NEWCO’s adjusted account balances as of December 31,
2015 are shown below (some noted balances are Jan. 1, 2015):
Sales . . . . . . . . . . . . . . . .
. . . . . . . .1,200,000
Purchases . . . . . . . . . . . . . . . . . . . . 810,000
Marketable securities . . . . . . . .. . . . . 15,000
Purchase discounts . . . . .. . . . . . . . . 20,000
Purchase returns and allowances. . . . 2,000
Selling expenses . . . . . . . . . . . . . . . 114,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . 147,000
Accounts receivable . . . . . . . . . . . . . 60,000
Common stock . . . . . . . . . . . . . . . . 150,000
Accumulated depreciation . . . . . . . . 42,000
Paid-in-capital in excess of par . . . . 30,000
Inventory, January 1, 2015 . . . . . . . . 149,000
Inventory, December 31, 2015. . . . . . 120,000
Accounts payable . . . . . . . . . . . . . . . 71,000
Salaries payable . . . . . . . . . . . . . . . . . 5,000
Patents . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
Retained earnings, January 1, 2015. . . 60,600
Interest expense . . . . . . . . . . . . . . . . . . 13,000
General and administrative expenses. . 160,000
Dividend revenue. . . . . . . . . . . . . . . . . . 6,000
Allowance for doubtful accounts . . . . . 3,000
Notes payable (maturity 7/1/2016) . . . . 105,000
Machinery and equipment . . . . . . . . . . 150,000
Income tax expense . . . . . . . . . . . . . . 30,600
Treasury stock . . . . . . . . . . . . . . . . . . . 10,000
Dividends declared and paid . . . . . . . . . 18,000
Based on the account balances provided, prepare a multi-step income statement and a classified balance sheet. Note: A “multi-step” income statement is one that shows Net Sales, Cost of Goods Sold, Gross Profit, Total Operating Expenses, Net gain/loss from other activities (if applicable), Income before taxes, Income tax expense, and Net Income.
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