10 Analyzing the Effects of Transactions in T-Accounts and Computing Cash Basis versus 3-4 Accrual Basis Net Income 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 Accounts receivable Supplies Equipment Land Building 6,400 32,000 1,500 9,500 7,400 25,300 Accounts payable Unearned revenue Long-term note payable Common stock Additional paid-in capital Retained earnings $ 9,600 3,840 48,500 1,600 7,000 11,560 Required 1. Create T-accounts for the balance sheet accounts and for these additional accounts: Rebuild- ing 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 the 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 3. Using the data from the T-accounts, amounts for the following at the end of January of the second year were AstsSLiabSokholders Equiy s Revenues $- Assets Expenses$Net Income $ - Liabilities 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)