Problem 2–10 Computations: Sales revenue Sales revenue during 2013 = $320,000 + 22,000 = $342,000 Cost of goods sold Cash paid Accounts payable 0 1/1 Balance 220,000 ? Purchases 30,000 12/31 Balance Purchases during 2013 = $220,000 + 30,000 = $250,000 Inventory 1/1 Balance 0 Purchases 250,000 ? Cost of goods sold 12/31 Balance 50,000 Cost of goods sold during 2013 = $250,000 – 50,000 = $200,000 Rent expense and prepaid rent Prepaid rent = $ 3,000 x 2/3 = Rent expense during 2013 = $14,000 – 2,000 = Depreciation expense Depreciation during 2013 $2,000 $12,000 = $30,000 x 10% = $3,000 Interest expense Interest accrued during 2013 = $40,000 x 12% x 9/12 = $3,600 Salaries expense Cash paid plus accrued salaries = $80,000 + 5,000 = $85,000 2–84 Problem 2–10 (continued) McGUIRE CORPORATION Income Statement For the Year Ended December 31, 2013 Sales revenue ................................................... Cost of goods sold ........................................... Gross profit ...................................................... Operating expenses: Salaries ........................................................... Rent ................................................................ Depreciation ................................................... Miscellaneous ................................................ Total operating expenses ................ Operating income ............................................. Other expense: Interest .......................................................... Net income ....................................................... $342,000 200,000 142,000 85,000 12,000 3,000 10,000 110,000 32,000 3,600 $ 28,400 2– Solutions Manual, Vol.1, Chapter 2 85 Problem 2–10 (concluded) McGUIRE CORPORATION Balance Sheet At December 31, 2013 Assets Current assets: Cash ............................................................ Accounts receivable .................................... Prepaid rent ................................................. Inventory ..................................................... Total current assets .................................. Equipment ..................................................... Less: Accumulated depreciation ................. Total assets ............................................ $ 56,000 22,000 2,000 50,000 130,000 $30,000 (3,000) 27,000 $157,000 Liabilities and Shareholders' Equity Current liabilities: Accounts payable ........................................ Salaries payable .......................................... Note payable ............................................... Interest payable ........................................... Total current liabilities ............................. Shareholders’ equity: Common stock ............................................ Retained earnings ....................................... Total shareholders’ equity ........................ Total liabilities and shareholders’ equity (1) $410,000 – 354,000 = $56,000 2–86 $ 30,000 5,000 40,000 3,600 78,600 $50,000 28,400 78,400 $157,000 (1)