Near the end of its first year of operations December #8526

Near the end of its first year of operations December

Near the end of its first year of operations, December 31, 2018, Creative Designs Ltd.
approached the local bank for a $20,000 loan and was asked to submit financial statements
prepared on an accrual basis. Although the company kept no formal accounting records, it did
maintain a record of cash receipts and payments. The following information is available for the
year ended December 31:

Additional information:

1. Fees from design work earned but not yet collected amounted to $2,400.

2. The equipment was purchased at the beginning of January and has an estimated six-year
useful life. The company uses straight-line depreciation.

3. Supplies on hand on December 31 were $1,260.

4. Rent payments included a $1,500 per month rental fee and a $2,000 deposit that is
refundable at the end of the two-year lease. (Hint: Use the Prepaid Rent account for the
refundable deposit.)

5. The insurance was purchased on February 1 for a one-year period expiring January 31,
2019.

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 6. Salaries earned for the last four days in December and to be paid in January 2019 amounted
to $3,050.

7. At year end, it was determined that an additional $7,000 is owed for income tax.

Instructions

(a) Calculate the cash balance at December 31.

(b) Prepare an accrual-based

(1) Income statement,

(2) Statement of changes in equity,

(3) Statement of financial position.

Compare cash and accrual-based income statements.

Near the end of its first year of operations December

ANSWER
http://paperinstant.com/downloads/near-the-end-of-its-first-year-of-operations-december/

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