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Maynard Company Income Statement Preparation
Please help me prepare an income statement and answer the following questions for this situation:
Diane Maynard was grateful for the balance sheets that her friend prepared. ( I attached the balance sheet I did) In going over the numbers, she remarked, "it's sort of surprising that cash increased by $31677, but net income was only $19635. Why was that? Her friend replied, "A partial answer to that question is to look at an income statement for June. I think I can find the data I need to prepare one for you." In addition to the data given in the case, her friend found a record of cash reciepts and disbursements, which is summarized in Exhibit 1. She also learned that all accounts payable were to vendors for purchase of merchandise inventory and that cost of sale was $39345 in June.
1. Prepare an income statement for June in proper format. Explain the derivation of each item on this statement, including cost of sales.
2. Explain why the change in the cash balance was greater than the net income.
3. Explain why the following amounts are incorrect cost of sales amounts for June: (a) 14715 and (b) 36030. Under what circumstances would these amounts be correct cost of sales amounts?
BALANCE SHEETS AS OF JUNE 1 AND JUNE 30
Current Assets: As of June I As of June 30:
Cash $ 34,983 $ 66,660
Accounts receivable 21,798 26,505
Note receivable 11,700 0
Merchandise inventory 29,835 26,520
Supplies on hand 5,559 6,630
Prepaid insurance 3,150 2,826
Total current assets $107,025 $129,141
Land 89,700 89,700
Building 585,000 585,000
Less: Accumulated depreciation (156,000 ) 429,000 ( 157,950 ) 427,050
Equipment 13,260 36,660
Less: Accumulated depreciation ( 5,304 ) 7,956 ( 5,928 )