Everest.com sells videos about adventure travel over the web. Below are the account balances as of
September 1, 2000 as well as a series of transactions for the month of September for Everest.com.
Cash
Accounts Receivable
Inventory (the videos)
Accounts Payable
Common Stock
Retained Earnings
$145,000
40,000
60,000
45,000
110,000
90,000
Sept 2 (Transaction 1): Bought $18,000 of inventory (videos) on credit.
Sept 3 (Transaction 2): Collected $32,000 from various customers for sales prior to September 1.
Sept 14 (Transaction 3): Paid MSNBC $3,000 for advertising on its web site for the month of September
Sept 20 (Transaction 4): Paid $24,000 towards inventory that had previously been bought on credit
Sept 30 (Transaction 5): Sold 2,500 videos during September at an average price of $24 each. Half the
sales were cash transactions, the rest were on credit.
Sept 30 (Transaction 6): Recorded the cost of the videos sold in Transaction 5. These 2,500 videos had an
average cost of $9 per unit.
Sept 30 (Transaction 7): Recorded its monthly rent bill of $700, but did not pay it.
Sept 30 (Transaction 8): Paid its employees $4,000 in wages for the month.
Part A: Using this information, prepare a Transaction Worksheet in good form, with column headings and
totals. (BE SURE TO PUT A "+" SIGN OR A "-" SIGN BEFORE EACH DOLLAR AMOUNT) If you
need additional rows or columns, feel free to add them.
Using the following account balances, prepare an income statement and balance sheet in good form for the
year ended December 31. 1999. (income statement = 10 points, balance sheet = 15 points)
Account name
End of year Balance
Accounts Payable
$ 152,000
Accounts Receivable
145,750
Cash
166,500
Common Stock
102,000
Cost of Goods Sold Expense
637,000
Depreciation Expense
67,000
Income Tax Expense
50,000
Income Tax Payable
42,000
Interest Expense
17,950
Inventory
106,000
Notes Payable (due Dec. 31, 2008)
110,000
Property, Plant and Equipment
222,000
Rental Expense
61,000
Retained Earnings, 1/1/99
139,200
Salaries Expense
237,000
Sales Revenue
1,222,000
Supplies Expense
57,000
Please note that the retained earnings figure in the table is the beginning of the year number!! There were
no dividends. Market price on 12/31/99 is $42 per share; the number of outstanding shares is 100,000.