ACCRUAL METHOD:

In July of this year, Stephen started a proprietorship called ECR

$($

which stands for electric car repair

$)$

$.$

ECR uses the ACCRUAL method of accounting and Stephen has produced the following financial information

for this year.

$$

$$ECR collected $

$81$

$,$

$000$

$$in cash for repairs completed during the year and an additional $

$3$

$,$

$200$

$$in

cash for repairs that will commence after yearend.

$$

$$Customers owe ECR $

$14$

$,$

$300$

$$for repairs completed this year, and while Stephen isn

$$

t sure which

bills will eventually be paid, he expects to collect all but about $

$1$

$,$

$900$

$$of these revenues next year.

ECR has made the following expenditures:

Interest expense $

$1$

$,$

$250$

Shop rent $

$1$

$,$

$500$

$$per month

$27$

$,$

$000$

Utilities

$1$

$,$

$075$

Contract labor

$8$

$,$

$250$

Compensation

$21$

$,$

$100$

Liability insurance premiums $

$350$

$$per month

$4$

$,$

$200$

Term life insurance premiums $

$150$

$$per month

$1$

$,$

$800$

The interest paid relates to interest accrued on a $

$54$

$,$

$000$

$$loan made to Stephen in July of this year.

Stephen used half of the loan to pay for

$18$

$$months of shop rent and the remainder he used to upgrade his

personal wardrobe. In July, Stephen purchased

$12$

$$months of liability insurance to protect against liability

should anyone be injured in the shop. ECR has only one employee

$($

the remaining workers are contract

labor

$)$

$,$

$$and this employee thoroughly understands how to repair an electric propulsion system. On

November

$1$

$$of this year, Stephen purchased a

$12$

$-$

month term

$-$

life policy that insures the life of this

$$

key

$$

employee. Stephen paid Gecko Insurance Company $

$1$

$,$

$800$

$,$

$$and in return, Gecko promises to pay Stephen

a $$40,000$

$$death benefit if this employee dies any time during the next

$12$

$$months$.$