Admin expenses 157.500 57.500 1.571.250 Admin wages $353,650 Profit for the year Since the above statement was prepared on a 100% cash basis, you real ized that it would not be acceptable to CRA. Consequently, you conducted an investigation of the records of the current year as well the previous year and you discovered the following: a. Of the $1,650,400 of Software Development fees collected in 2020, $156,600 was for work performed in 2019. b. On December 31, 2020, uncollected Software Development fees for work performed during 2020 were $184,350. C. The company provides web-hosting services on a monthly basis at a cost of $1,250 per month. At December 31, 2020, only $22,500 of the fees paid were for services up to the end of the fiscal year. d. When the company began business in 2018 it entered into a 10-year agreement with Office Supplies Inc. to rent all of the computer equipment. The monthly rental costs are $35.000, paid at the end of each month. e. In December 2020 it signed an agreement to rent one new piece of equipment. The equipment was delivered on Dec 1, 2020, however the first monthly lease payment of $1,600 wasn't paid until January 1, 2021. f. Office rent is paid at the rate of $13,500 per month on the 1st of each month for the previous month. g. On December 31, 2020, a count of supplies inventory indicated $5,600 was on hand. It was estimated that on January 1, 2020, supplies inventory of g. On December 31, 2020, a count of supplies inventory indicated $5,600 was on hand. It was estimated that on January 1, 2020, supplies inventory of $3,100 was on hand. h. Administrative staff started March 1, 2020. On December 31, 2020 wages amounting to $6,400 remained unpaid. i. The unpaid utilities bill for December, 2020 was expected to be $6,500. No amounts were unpaid at the end of 2019. j. Rather than take a salary, the founders declared and paid dividends of $4.000 each month for all of 2020. k. The tax rate for the corporation is 20% and no taxes have been paid to date in fiscal 2020. Required: 1. Prepare an income statement for 2020 on an accrual basis (single or multi- step). Use the same categories of expenses as the initial income statement and show your work/calculations to support any changes in amounts from the statement prepared by the bookkeeper. 2. Discuss the benefits and shortcomings of a Cash Based Accounting System. Admin expenses 157.500 57.500 1.571.250 Admin wages $353,650 Profit for the year Since the above statement was prepared on a 100% cash basis, you real ized that it would not be acceptable to CRA. Consequently, you conducted an investigation of the records of the current year as well the previous year and you discovered the following: a. Of the $1,650,400 of Software Development fees collected in 2020, $156,600 was for work performed in 2019. b. On December 31, 2020, uncollected Software Development fees for work performed during 2020 were $184,350. C. The company provides web-hosting services on a monthly basis at a cost of $1,250 per month. At December 31, 2020, only $22,500 of the fees paid were for services up to the end of the fiscal year. d. When the company began business in 2018 it entered into a 10-year agreement with Office Supplies Inc. to rent all of the computer equipment. The monthly rental costs are $35.000, paid at the end of each month. e. In December 2020 it signed an agreement to rent one new piece of equipment. The equipment was delivered on Dec 1, 2020, however the first monthly lease payment of $1,600 wasn't paid until January 1, 2021. f. Office rent is paid at the rate of $13,500 per month on the 1st of each month for the previous month. g. On December 31, 2020, a count of supplies inventory indicated $5,600 was on hand. It was estimated that on January 1, 2020, supplies inventory of g. On December 31, 2020, a count of supplies inventory indicated $5,600 was on hand. It was estimated that on January 1, 2020, supplies inventory of $3,100 was on hand. h. Administrative staff started March 1, 2020. On December 31, 2020 wages amounting to $6,400 remained unpaid. i. The unpaid utilities bill for December, 2020 was expected to be $6,500. No amounts were unpaid at the end of 2019. j. Rather than take a salary, the founders declared and paid dividends of $4.000 each month for all of 2020. k. The tax rate for the corporation is 20% and no taxes have been paid to date in fiscal 2020. Required: 1. Prepare an income statement for 2020 on an accrual basis (single or multi- step). Use the same categories of expenses as the initial income statement and show your work/calculations to support any changes in amounts from the statement prepared by the bookkeeper. 2. Discuss the benefits and shortcomings of a Cash Based Accounting System