Question

The income statement shown below was prepared and sent by Jenna Preston, the owner of Preston Gifts, to several of her creditors. The business is a sole proprietorship that sells miscellaneous gifts. An accountant for one of the creditors looked over the income statement and found that it did not conform to generally accepted accounting principles. PRESTON GIFTS Income Statement Year Ended December 31, 2019 Cash Collected from Customers $ 138,000 Cost of Goods Sold Merchandise Inventory, Jan. 1 $ 48,000 Payments to Suppliers 88,000 136,000 Less: Merchandise Inventory, Dec. 31 36,000 Cost of Goods Sold 100,000 Gross Profit on Sales 38,000 Operating Expenses Salary of Owner 63,000 Salary of Employees 49,200 Payroll Taxes Expense 4,400 Rent Expense 13,400 Advertising Expense 2,900 Utilities Expense 4,500 Total Expenses 137,400 Net Loss $ (99,400 ) Additional information provided by owner: All sales were for cash. The beginning and ending merchandise inventories were valued at their estimated selling price. The actual cost of the ending inventory is estimated to be $30,000. The actual cost of the beginning inventory is estimated to be $38,000. On December 31, 2019, suppliers of merchandise are owed $29,000. On January 1, 2019, they were owed $23,000. The owner paid herself a salary of $5,250 per month and charged this amount to the Salary of Owner account. A check for $980 to cover the December rent on the owner’s personal apartment was issued from the firm’s bank account. This amount was charged to Rent Expense. Using the additional information provided by the owner, prepare an income statement in accordance with generally accepted accounting principles. (Input all amounts as positive values except "Net loss" which should be indicated with a minus sign.)

PRESTON GIFTS
Income Statement
Year Ended December 31, 2019
Cost of goods sold
Total merchandise available for sale
Cost of goods sold
Operating expenses
Total expenses

Answer 1