1041.42 CP4-6 Using Financial Reports: Analyzing Financial Information in a Sale of a Business (A Challenging Case) Robert Brissette, a local massage therapist, decided to sell his practice and retire. He has had discussions with a therapist from another province who wants to relocate. The discussions are at the complex stage of agreeing on a price. The financial statements of Robert's practice, Brissette Stress Reduction, played an important role in this process. Robert's secretary, Keisey Doucette, maintained the records, under his direction. Each year, Kelsey developed a statement of net earnings on a cash basis from the records she maintained, but she did not prepare a statement of financial position. Upon request, Robert provided the other therapist with the following statements for 2018 prepared by Kelsey: s CHAPTER 4 A ian Sta t e Quality of Earrings BRUSSETTE STRESS REDUCTION 1150.000 Tweetcs 1600 2200 100 Offee pen O 140 3 .140 te the parties have been asked to examine the financial que her the question the figures , goth , a la pu rush h o mestigations revealed the following additional data at the the in the for ected in 2018 1000 was for services performed e prero the therapy fees for serve performed during the war e ntwe d by Tree Stressledition con 8,000 in der ale of w ar Anmentary of office supplies at December 31, 2018, r ected $100 worth of items during the war that we will hand. Ah, the records for 2017 indicate that the hand at the end of that were about Al the end of 2015 Krise, whose salary is per prar, had not been paid for the last December because the best p lay in January 2010 The phone hill for December 2018 was no pued until January 11, 2019 The part for orice rent was for 13 months, including January 2010 Required: I. Prepare a correctament of earnings for 2015 had on the information above. Show your computation for any amounts changes from those in the statement prepared by Kele four commenting hem. Cash Flasis we arties Statement, 8. Explanation of Charm and Correct i s, 5) 2. Write a memo to support your schedule prepared in (1). The purpose should be to explain the s for pour changes and to suggest other important items that should be considered in the ping decision. $130,000 360 BRISSETTE STRESS REDUCTION Statement of Earnings 2018 Therapy fees collected Expenses paid: Rent for office space $19,500 Utilities expense Telephone expense 2,200 Office salaries expense 23,500 Office supplies expense 900 Miscellaneous expenses 1,400 Total expenses Net earnings 47,860 $ 82.140 Upon agreement of the parties, you have been asked to examine the final be Upon agreement of the parties, you have been asked to examine the financial figures for 2018 ! other therapist said, "I question the figures because, among other things, they appear to be on a percent cash basis." Your investigations revealed the following additional data at December 31, 2014 a. or the $130,000 in therapy fees collected in 2018, $30,000 was for services performed prior to 2018 b. At the end of 2018, therapy fees of $6,000 for services performed during the year were uncollected c. Office equipment owned and used by Brissette Stress Reduction cost $8,000. It is depreciated at a rate of $800 per year. d. An inventory of office supplies at December 31, 2018, reflected $400 worth of items purchased during the year that were still on hand. Also, the records for 2017 indicate that the supplies on hand at the end of that year were about $250. e. At the end of 2018, Kelsey, whose salary is $24,000 per year, had not been paid for the last week of December because the next payday is January 8, 2019. s. The $140 phone bill for December 2018 was not paid until January 11, 2019. 9. The payment for office rent was for 13 months, including January 2019. e. At the end of 2018, Kelsey, WHULU December because the next payday is January 8, 2019. . The $140 phone bill for December 2018 was not paid until January 11, 2019. g. The payment for office rent was for 13 months, including January 2019. Required: 1. Prepare a correct statement of earnings for 2018 based on the information above. Show your computations for any amounts changed from those in the statement prepared by Kelsey. (Hint: use four column headings: Item, Cash Basis per Brissette's Statement, $; Explanation of Changes and Corrected Basis, $.) 2. Write a memo to support your schedule prepared in (1). The purpose should be to explain the reasons for your changes and to suggest other important items that should be considered in the pricing decision. 4.7 Ising Financial Reports: Preparing Statements of Earnings for Different Periods