McMinn Retail, Inc.

 

 

McMinn Retail, Inc., is a retailer that has engaged you to assist in the preparation of its financial statements at December 31, 2011. Following are the correct adjusted account bal- ances, in alphabetical order, as of that date. Each balance is the “normal” balance for that account. (Hint: The “normal” balance is the same as the debit or credit side that increases the account.)

 

Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              $ 12,750

Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  2,600

Accumulated depreciation: office equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .              12,000

Additional paid-in capital (common stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              7,000

Bonds payable (due December 31, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                22,500 Cash  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       15,200

Common stock (1,800 shares, $10 par value). . . . . . . . . . . . . . . . . . . . . . . . . . . .              18,000 Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                           100,575

Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  5,750

Depreciation expense: office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                2,750 Dividends declared  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    5,000

Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  8,190

Insurance expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      900

Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  37,500

Merchandise inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               17,500

Notes payable (due December 31, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                2,500 Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            41,000

Office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      900

Office supplies expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     520

Preferred stock (250 shares, $20 par value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 5,000

Premium on bonds payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  1,750

Prepaid rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   1,800

Rent expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   6,100

Retained earnings (January 2011)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               21,050

Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 88,095

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                226,000

Sales returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 2,500

Sales taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   3,200

Treasury stock (200 common shares at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                2,250 Utilities expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                4,120

 

 

Instructions

a.       Prepare an income statement for the year ended December 31, 2011, which includes amounts for gross profit, income before income taxes, and net income. List expenses (other than cost of goods sold and income tax expense) in order, from the largest to the smallest dollar balance. You may ignore earnings per share.

b.       Prepare a statement of retained earnings for the year ending December 31, 2011.

c.        Prepare a statement of financial position (balance sheet) as of December 31, 2011, fol- lowing these guidelines:

•       Include separate asset and liability categories for those assets which are “current.”

•       Include and label amounts for total assets, total liabilities, total stockholders’ equity, and total liabilities and stockholders’ equity.

•       Present deferred income taxes as a noncurrent liability.

•       To the extent information is available that should be disclosed, include that information in your statement.