From the information that follows, prepare an income statement and balance sheet for ABC Management Consulting for presentation at the annual board of directors meeting. Use proper formatting of financial statements by reviewing the various illustrations and exhibits in the texts. For the purposes of this assignment, you can ignore income taxes. You may use either a word-processing or electronic spreadsheet program to present your information.
Cash: $15,000.
Sales: $742,460.
Long-term investments: $100,000.
Accounts receivable: $60,660.
Depreciation expense: $10,000.
Office supplies: $17,000.
Salaries expense: $105,000.
Prepaid insurance: $3,600.
Interest expense: $3,750.
Office equipment: $120,000.
Insurance expense: $4,600.
Accounts payable: $32,000.
Rent expense: $14,400.
Interest payable: $2,150.
Office supplies expense: $3,000.
Salaries payable: $16,000.
Advertising expense: $48,000.
Long-term notes payable: $75,000.
Utilities expense: $11,000.
Retained earnings: $120,000.
Interest earned: $5,000.
Inventory: $79,755.
Cost of goods sold: $406,845.
Accumulated depreciation: $10,000.
To prepare an income statement and balance sheet for ABC Management Consulting, we will need to organize the given information into the relevant financial statement components. Let's start with the income statement:
1. Income Statement:
Sales: $742,460
Cost of Goods Sold: $406,845
Gross Profit: (Sales - Cost of Goods Sold)
Salaries Expense: $105,000
Rent Expense: $14,400
Insurance Expense: $4,600
Office Supplies Expense: $3,000
Advertising Expense: $48,000
Interest Expense: $3,750
Utilities Expense: $11,000
Depreciation Expense: $10,000
Total Operating Expenses: (sum of the above expenses)
Operating Income: (Gross Profit - Total Operating Expenses)
2. Balance Sheet:
Assets:
Cash: $15,000
Accounts Receivable: $60,660
Long-Term Investments: $100,000
Office Supplies: $17,000
Prepaid Insurance: $3,600
Office Equipment: $120,000
Accumulated Depreciation: $10,000
Inventory: $79,755
Total Assets: (sum of the above assets)
Liabilities and Shareholders' Equity:
Accounts Payable: $32,000
Salaries Payable: $16,000
Interest Payable: $2,150
Long-Term Notes Payable: $75,000
Total Liabilities: (sum of the above liabilities)
Retained Earnings: $120,000
Total Liabilities and Shareholders' Equity: (Total Liabilities + Retained Earnings)
Remember to format the financial statements appropriately, such as using column titles, arranging items in their respective sections (revenue, expenses) in the income statement, and distinguishing between assets and liabilities in the balance sheet. You may choose to use a word-processing or electronic spreadsheet program for presentation.
Please note that this answer assumes the absence of income taxes, as specified in the question.