1. On January 2, purchased supplies for $4,100 cash. A physical count at December 31 revealed that $700 of supplies were still on hand. 2. Purchased a vehicle for $45,000 on April 1, paying $5,000 cash and signing a $40,000 bank loan for the balance. Th e vehicle is estimated to have a useful life of fi ve years. 3. Purchased a $3,600, one-year insurance policy for cash on August 1. Th e policy came into eff ect on that date. 4. Received a $1,600 advance cash payment from a client on November 9 for services to be provided in the future. As at December 31, half of these services had been completed. 5. On December 1, the company rented additional offi ce space for a six-month period starting on December 1 for $1,200 each month. It paid rent for the months of December and January in advance on this date.

Problems: Set A 4-1A Your examination of the records of Southlake Corp. shows the company collected $187,800 in cash from customers nd paid $109,400 in cash for operating costs in its first year of operations. If Southlake followed the accrual basis of ccounting, it would report the following year-end balances in selected accounts: Accounts payable $3,000 Accounts receivable 8,400 Accumulated depreciation 24,600 Income tax payable 15,800 Prepaid insurance 3,000 Unearned revenue 2,800 Instructions (a) Calculate Southlake's profit on a cash basis for the year. (b) Calculate Southlake's profit on an accrual basis for the year. (Hint: Start with the profit calculated on a cash basis in (a) and then adjust for prepayments and accruals.) (c) Which basis of accounting do you recommend Southlake use? Why? mn. The account balances at the end of July 2006 are as follows: 11 Cash 31,200 12 Accounts Receivable 45,750 13 Prepaid Insurance 2,800 14 Office Supplies 1,000 16 Land 21 Accounts Payable 5.200 22 Unearned Rent 23 Notes Payable 31 Larissa Sanchez, Capital 39,700 32 Larissa Sanchez, Drawing 16,000 41 Fees Earned 224,000 51 Salary and Commission Expense 133,000 52 Rent Expense 17,500 53 Advertising Expense 14,300 54 Automobile Expense 6,400 59 Miscellaneous Expense 950 268,900 268,900 The following business tran completed by Fickle Realty during August 2006: Aug. 1. Purchased office supplies on account, $1.760 2. Paid rent on office for month. $2,500. 3. Received cash from clients on account, $38, 720. 5. Paid annual insurance premiums, $3,600. 9. Retumed a portion of the office supplies purchased on August 1. receiv ing full credit for their cost, $240. 17. Paid advertising expense, $3,450. 23. Paid creditors on account, $2,670. 29. Paid miscellaneous expenses, $350. 30. Pald automobile expense (including rental charges for an automobile), 51.360, 31. Discovered an error in computing a commission received cash from the salesperson for the overpayment, $800. 31. Paid salaries and commissions for the month $17.400. 31. Recorded revenue eamed and billed to clients during the month, $41.900. 31. Purchased land for a future building site for $75,000. puying $10,000 in cash and giving a note payable for the remainder. 31. Withdrew cash for personal use, $2,500 31. Rented land purchased on August 31 to local university for use as a parking lot during football season (September October, and November), received advance payment of $1,500