Analysis of Transactions and Preparation of Comparative Income Statements and Balance Sheets

Analysis of transactions and preparation of comparative income statements and balance sheets Refer to the information for Zea1ock Bookstore in Problem 36. The following transactions relate to 2009.

(1) March 15, 2009: Pays income taxes for 2008.

(2) June 30, 2009: Repays the bank loan with interest.

(3) July 1, 2009: Obtains a new bank loan for $75,000. The loan is repayable on June 30, 2010, with interest due at maturity of 8%.

(4) July 1, 2009: Receives the security deposit back from the book distributors

(5) July 1, 2009: Pays the rent due for the period Jul) 1, 2009, to June 30, 2010.

(6) During 2009: Purchases books on account costing $310,000.

(7) During 2009: Sells books costing $286,400 for $353,700. Of the total sales, $24,900 is for cash, $850 is from special orders received during December 2008, and $327,950 is on account.

(8) During 2009: Returns unsold books costing $22,700. The firm had not yet paid for these books.

(9) During 2009: Collects $320,600 from sales on account.

(10) During 2009: Pays employees compensation of $29,400.

(11) During 2009: Pays book distributors $281,100 for purchases of books on account.

(12) December 31. 2009: Declares and pays a dividend of $4,000.

a. Using T-accounts, enter the amounts for the balance sheet on December 31, 2008, from Problem 36, the effects of the 12 transactions above, and any required entries on December 31, 2009, to properly measure net income for 2009 and financial position on December 31, 2009.

b. Prepare a comparative income statement for 2008 and 2009.

c. Prepare a comparative balance sheet for December 31, 2008, and December 31, 2009.

SOLUTION

(Zealock Bookstore; analysis of transactions and preparation of comparative income statements and balance sheet.)

a. T-accounts.

Cash (A) Accounts Receivable (A)

√ 24,350 √ 5,800

(3) 75,000 1,320 (1) (7) 327,950 320,600 (9)

(4) 8,000 31,800 (2)

(7) 24,900 20,000 (5)...