ICP 4-1 Solution
a. 1. Cash $100,000
Capital Stock $100,000
2. Prepaid Rent 28,000
Cash 28,000
3. Furniture and Fixtures 25,000
Cash 25,000
4. Cash 100,000
Bank Loan 100,000
5. Inventory 75,000
Accounts Payable 75,000
6. Prepaid Insurance 3,600
Cash 3,600
7. Cash 540,000
Accounts Receivable 375,000
Sales 915,000
8. Cash 320,000
Accounts Receivable 320,000
9. Inventory 450,000
Accounts Payable 450,000
10 Advertising Expense 25,000
.
Wages and Salaries Expense 165,000
Miscellaneous Expense 18,000
Interest Expense 7,500
Accounts Payable 432,000
Retained Earnings 90,000
Rent Expense 154,000
Cash 891,500
11 Depreciation 2,500
.
Accumulated Depreciation 2,500
12 Insurance Expense 2,400
.
Prepaid Insurance 2,400
13 Interest Expense 750
.
Other Payable 750
14 Cost of Goods Sold 439,000
.
Inventory 439,000
15 Sales 5,600
.
Unearned Revenue 5,600
16 Miscellaneous Expense 5,700
.
Accounts Payable 5,700
17 Wages and Salaries Expense 2,500
.
Other Payables 2,500
18 Rent Expense 14,000
.
Prepaid Rent 14,000
19 Income Taxes 29,915
.
Other Payables 29,915
Assets SFP Liabilities & Equity
Accounts Accounts
Cash Receivable Payable
1 100,000 28,000 2 7 375,000 320,000 8 10 432,000 75,000 5
4 100,000 25,000 3 450,000 9
7 540,000 3,600 6 B 55,000 5,700 16
8 320,000 891,500 10 98,700 B
B 111,900
Inventory Unearned Revenues
5 75,000 439,000 14 5,600 15
9 450,000
B 86,000
Prepaid Insurance Bank Loan
6 3,600 2,400 12 100,000 4
B 1,200
Prepaid rent Furniture & Fixtures Other Payables
2 28,000 14,000 18 3 25,000 750 13
B 14,000 2,500 17
21,915 19
25,165 B
Accumulated Capital
Depreciation Stock
2,500 11 100,000 1
Retained
Earnings
10 90,000
Expenses INCOME STATEMENT Revenues
Cost of Goods Sold Wages & Salaries Sales
14 439,000 10 165,000 15 5,600 915,000 7
17 2,500
B 167,500 909,400 B
Depreciation Advertising
11 2,500 10 25,000
Miscellaneous Interest
10 18,000 10 7,500
16 5,700 13 750
B 23,700 B 8,250
Rent Insurance
10 154,000 12 2,400
18 14,000
B 168,000
Income Taxes
19 21,915
Assets SFP Liabilities & Equity
Accounts Accounts
Cash Receivable Payable
Inventory Unearned Revenues
Prepaid Insurance Bank Loan
Prepaid rent Furniture & Fixtures Other Payables
Accumulated Capital
Depreciation Stock
Retained
Earnings
Expenses INCOME STATEMENT Revenues
Cost of Goods Sold Wages & Salaries Sales
Depreciation Advertising
Miscellaneous Interest
Rent Insurance
Income Taxes
b. KP Sports Inc.
Trial Balance
As at December 31, 20x3 Debit Credit
Cash $111,900
Accounts receivable 55,000
Inventory 86,000
Prepaid Insurance 1,200
Prepaid rent 14,000
Furniture and fixtures 25,000
Accumulated depreciation $ 2,500
Accounts payable 98,700
Other payables 25,165
Unearned income 5,600
Bank loan 100,000
Capital Stock 100,000
Retained earnings 90,000
Sales 909,400
Cost of goods sold 439,000
Wages and salaries 167,500
Depreciation expense 2,500
Advertising 25,000
Miscellaneous 23,700
Interest 8,250
Rent 168,000
Insurance 2,400
Income taxes 21,915
$1,241,365 $1,241,365
c. KP Sports Inc.
Income Statement
for the year ended December 31, 20x3
Sales $909,400
Cost of goods sold 439,000
Gross profit 470,400
Operating expenses
Wages and salaries 167,500
Depreciation 2,500
Advertising 25,000
Miscellaneous 23,700
Rent 168,000
Insurance 2,400
389,100
Operating Income 81,300
Interest expense 8,250
Net income before taxes 73,050
Income tax expense 21,915
Net income $51,135
KP Sports Inc.
Statement of Changes in Shareholders' Equity
for the year ended December 31, 20x3
Retained
Common Earnings
Stock (Deficit) Total
Balance, January 1, 20x3 $0 $0 $0
Issue of common stock 100,000 100,000
Net income 51,135 51,135
Dividends (90,000) (90,000)
Balance, December 31, 20x3 $100,000 ($38,865) $61,135
KP Sports Inc.
Statement of Financial Position
as at December 31, 20x3
ASSETS
Current Assets
Cash $111,900
Accounts receivable 55,000
Inventory 86,000
Prepaid insurance 1,200
Prepaid rent 14,000
268,100
Noncurrent Assets
Furniture and fixtures 25,000
Less accumulated depreciation 2,500
22,500
$290,600
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 98,700
Other payables 25,165
Unearned income 5,600
129,465
Long-term debt
Bank loan 100,000
Shareholders’ Equity
Capital stock 100,000
Deficit (38,865)
61,135
$290,600