2.Now use the transaction information to create a Accrual-Based Income Statement for January using the following template.

Account	Balance
Revenues	$
Cost of Goods Sold	$
Gross Margin, or Gross Profit	$
Expenses
Salaries and Wages	$
Rent and Utilities	$
Advertising	$
Insurance	$
Equipment Depreciation	$
Interest	$
Total Expenses	$
Net Income	$

Use the Accrual-Based Income Statement you created above to answer the following questions.

3.What is the gross margin percent for Sample Cafe?

4.For each cup of coffee sold, what is the average contribution margin?

5. What are salaries and wages as a percent of revenue?

6.What is the net income as a percent of revenue?

7.If Sample Cafe had given employees a 10% raise at the beginning of January, what would net income have been presuming taxes increase at the same rate as wages?

8.

Which of the following statements are true based on the differences between the two accounting approaches used in January?

A.The cash-based system understated revenues relative to what was actually sold.

B.Cash received from sales was less than revenues on the income statement using the accrual-based system

C.Cash flows were more accurately represented using the accrual-based system

D.The monthly cost of having an espresso machine was more accurately represented using the accrual-based system.

E. Net income is always higher using an accrual accounting system

The following is a summary of transactions for January 20xx, gathered by the Sample Cafe bookkeeper. Sample Cafe Transactions Item Notes 8,500 medium cups of coffee sold at $3.00 each Includes 600 medium cups medium cups sold to the college and delivered to a reception that has been invoiced, but not yet paid. 3,900 large cups of coffee sold at $4.00 each $ Espresso maker purchased last year for $12,600 5-year life 5 $600 premium for business insurance Premium for full year $3,200 for rent Includes $2,000 in rent deposits $2,500 for coffee beans Includes coffee discarded valued at $100 $1,700 for coffee cups $14,100 to employees for payroll $300 of interest on loan $ O cups in inventory at the beginning of January. $700 worth of cups still in inventory at the end of month. $2,300 owed in payroll taxes $ Paid mid-month - $1,000 for electricity and water Includes $600 in utility deposits $11,200 in advertising $2,800 per week billed monthly Use the preceding transaction information to create a Cash-Based Income Statement for January using the following template. Account Balance Revenues $ 41100 Expenses Coffee and Cups $ 600 Salaries and Wages $ 11800 Rent and Utilities $ 1600 Advertising $ 11200 Insurance $ 600 Equipment $12600 Interest 300 Other Expenses $ 2500 Total Expenses $ 0 Net Income $ 0 The following is a summary of transactions for January 20xx, gathered by the Sample Cafe bookkeeper. Sample Cafe Transactions Item Notes 8,500 medium cups of coffee sold at $3.00 each Includes 600 medium cups medium cups sold to the college and delivered to a reception that has been invoiced, but not yet paid. 3,900 large cups of coffee sold at $4.00 each $ Espresso maker purchased last year for $12,600 5-year life 5 $600 premium for business insurance Premium for full year $3,200 for rent Includes $2,000 in rent deposits $2,500 for coffee beans Includes coffee discarded valued at $100 $1,700 for coffee cups $14,100 to employees for payroll $300 of interest on loan $ O cups in inventory at the beginning of January. $700 worth of cups still in inventory at the end of month. $2,300 owed in payroll taxes $ Paid mid-month - $1,000 for electricity and water Includes $600 in utility deposits $11,200 in advertising $2,800 per week billed monthly Use the preceding transaction information to create a Cash-Based Income Statement for January using the following template. Account Balance Revenues $ 41100 Expenses Coffee and Cups $ 600 Salaries and Wages $ 11800 Rent and Utilities $ 1600 Advertising $ 11200 Insurance $ 600 Equipment $12600 Interest 300 Other Expenses $ 2500 Total Expenses $ 0 Net Income $ 0