Chapter 1, Problem 1.1P

Preparing an Income Statement, Statement of Stockholders’ Equity, and Balance Sheet

Assume that you are the president of Highlight Construction Company. At the end of the first year of operations (December 31), the following financial data for the company are available:

Cash	$ 25,600
Receivables from customers (all considered collectible)	10,800
Inventory of merchandise (based on physical count and priced at cost)	81,000
Equipment owned, at cost less used portion	42,000
Accounts payable owed to suppliers	46,140
Salary payable (on December 31, this was owed to an employee who will be paid on January 10)	2,520
Total sales revenue	128,400
Expenses, including the cost of the merchandise sold (excluding income taxes)	80,200
Income taxes expense at 30% × Pretax income: all paid during the current year	?
Common stock (December 31)	87,000
Dividends declared and paid during the current year	10,000

(Note: The beginning balances in Common Stock and Retained Earnings are zero because it is the first year of operations.)

Required:

Using the financial statement exhibits in the chapter as models and showing computations:

1. 1. Prepare a summarized income statement for the year.
2. 2. Prepare a statement of stockholders’ equity for the year.
3. 3. Prepare a balance sheet at December 31.