Reconstructing the income statement and balance sheet Computer Needs, Inc., operates a retail store that sells computer hardware and software. It began operations on January 2, 2007, and operated successfully during its first year, generating net income of $8,712 and ending the year with $15,600 in its bank account. Exhibit 2.16 presents an income statement for 2007, and Exhibit 2.17 presents a balance sheet as of the end of 2007. As 2008 progressed, the owners and managers of Computer Needs, Inc., felt that they were doing even better. Saks seemed to be running ahead of 2007, and customers were always in the store. Unfortunately, a freak lightning storm hit the store on December 31, 2008, and completely destroyed the computer on which Computer Need, inc., kept its records. It now faces the dilemma of calculating 2008 income in order to assess its operating performance and to calculate income taxes for the year. You are asked to prepare an income statement for 2008 and a balance sheet at the end of 2008. To assist in this effort, you obtain the following information.

(1) The bank at which Computer Needs, Inc., maintains its account provided a summary of the transactions during 2008, as shown in Exhibit 2.18.

(2) Cash received during January 2009, from third-party credit card companies and from customers for sales made during 2008 totaled $40,300. This is your best estimate of accounts receivable outstanding on December 31, 2008.

(3) Clerks took a physical inventory of merchandise on January 1, 2009. Using cur rent catalogs from suppliers, you estimate that the merchandise has a total cost of $60,700.

(4) Computer Needs. Inc., had paid its annual insurance premium on October 1, 2008 (included in the amounts in Exhibit 2.18). You learn that $1.800 of the insurance premium applies to coverage during 2009.

(5) Based on depreciation claimed during 2007 and new equipment purchased during 2008, you estimate 2008 depreciation expense of $3,300.

(6) Bills received from merchandise suppliers during January 2009 totaled $45,300. This is your best estimate of accounts payable outstanding to these suppliers on December 31, 2008.

(7) Other Current Liabilities represent amounts payable to employees and other providers of selling and administrative services. Other Current Liabilities as of December 31, 2008, total $1, 200.

Prepare an income statement for Computer Needs, Inc., for 2008 and a balance sheet on December 31, 2008. The income tax rate is 28%.

Computer Needs, Inc. Income Statoment EXHIBIT 2.16 For the Year Ended December 31, 2007 (Problem 39) S 152,700 Sales. . Cost of Goods Sold (116,400) (17,400) (2,800) Selling and Administrative Expenses Depreciation Interest. (4,000) Income Taxes. (3,388) S 8,712 Net Income Computer Needs, Inc. Balance Sheet December 31, 2007 EXHIBIT 2.17 (Problem 39) ASSETS Cash . Accounts Receivable Inventories S 15,600 32,100 46,700 Prepayments Total Current Assets. 1,500 $ 95,900 Property, Plant, and Equipment: At Cost Less Accumulated Depreciation 5 59,700 (2,800) $ 56,900 Net Total Assets $152,800 LIABILITIES AND SHAREHOLDERS EDUITY Accounts Payable Merchandise Suppliers Income Tax Payable $ 37,800 3,388 Other Current Liabilities 2,900 Tatal Current Liabilities 44,088 Martgage Payable 50,000 $ 94,088 $ 50,000 Total Liabilities. Common Stack. Retained Earmings 8,712 Tatal Shareholders Equity. $ 58,712 Total Liabilities and Shareholders' Equity $152,800 Computer Neods, Inc. Analysis of Changes in Bank Accounts For the Year Ended December 31, 2008 (Problem 39) EXHIBIT 2.18 Balance, January 1, 2008.. Receipts: $ 15,600 Cash from Cash Sales . 37,500 Checks Received from Third-Party Credit Cards and Customers. 151,500 Disbursements: To Merchandise Suppliers (164,600) Ta Empioyes and Other Providers of Selling and Administrative Activities. (21,000) (3,388) (4,800) Ta U.S. Government for Income Taxes for 2008. To Bank for Interest (54,000) and Principal on Mortgage (5800). To Supplier of Equipment Balance, December 31, 2008.. (6,000) $ 4,812