Stacey's Piano Rebuilding Company has been operating for one year. At the start of the second year, its income statement accounts had zero balances and its balance sheet account balances were as follows:
Cash............................. $ 6,400
Accounts receivable...... 32,000
Supplies........................ 1,500
Equipment..................... 9,500
Land........................... 7,400
Building ...................... 25,300
Accounts payable............. $ 9,600
Unearned revenue ............ 3,840
Long-term note payable...... 48,500
Common stock................ 1,600
Additional paid-in capital.... 7,000
Retained earnings ............. 11,560
Required:
1. Create T-accounts for the balance sheet accounts and for these additional accounts: Rebuilding Fees Revenue, Rent Revenue, Wages Expense, and Utilities Expense. Enter the beginning balances.
2. Enter the following transactions for January of the second year into the T-accounts, using the letter of each transaction as the reference:
a. Rebuilt and delivered five pianos in January to customers who paid $19,000 in cash.
b. Received a $600 deposit from a customer who wanted her piano rebuilt.
c. Rented a part of the building to a bicycle repair shop; received $850 for rent in January.
d. Received $7,200 from customers as payment on their accounts.
e. Received an electric and gas utility bill for $400 to be paid in February.
f. Ordered $960 in supplies. .
g. Paid $2,300 on account in January.
h. Received from the home of Stacey Eddy, the major shareholder, a $920 tool (equipment) to use in business in exchange for 100 shares of $1 par value stock.
i. Paid $16,500 in wages to employees who worked in January.
j. Declared and paid a $2,200 dividend (reduce Retained Earnings and Cash).
k. Received and paid cash for the supplies in (f).
3. Using the data from the T-accounts, amounts for the following at the end of January of the second year were

4. What is net income if Stacey's used the cash basis of accounting? Why does this differ from accrual basis net income (in requirement 3)?

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