***ANSWER THE QUESTIONSVIA THE ATTACHED EXCEL DOCUMENT***

Anne Marie, the owner of Annes Beauty Salon, comes to see you again.She tells you that she just got her year-end set of financial statements from her accountant and is more confused.Here are her questions.

1.I have very little cash and yet he says that I had a good year with $15,000 net income.He said it was because we use accrual accounting (whatever that means).I know I paid 6 months rent ($1,400 a month) in advance at the end of the year.I also paid my insurance for the next year.Insurance cost $6,000.I have several customers who had a lot of services done on credit and havent paid yet.I think that totals $2,000 owed to me.Can you explain?

2.I was paid $200 in advance for some hair coloring I will do in January.He tells me thats a liability.That doesnt make any sense to me?Please explain.

3.In December I did several hair several haircuts during the last week of the year and sent bills to all the customers?When is that counted?

How would you answer these questions?

Anne's Beauty Salon, Inc Income Statement For the Year 2015 Sales (Revenue) $ 125,000.00 Cost of Sales $ 25,000.00 Gross Profit $ 100,000.00 Payroll Expense $ 67,500.00 Sales, General, Administrative Expense Rent Expense Utilities Expense Insurance Expense Depreciation Expense Total Operating Expense Total Operating Income Taxes 30% Net Income $ $ $ $ $ $ $ $ $ 5,000.00 1,400.00 1,670.00 500.00 2,500.00 78,570.00 21,430.00 6,430.00 15,000.00 Note, Income Statements should be monthly. This Income Statement is Michael LaFountain: Rounding due to taxes. monthly. This Income Statement is for training purposes, ONLY! Anne's Beauty Salon, Inc Balance Sheet At December 31, 2015 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Rent Prepaid Insurance Total Current Assets Equipment Less: Accumulated Depreciation Total Long-Term Assets Total Assets $ $ $ $ $ $ $ $ 25,000.00 (5,000.00) $ $ $ Liabilities Current Liabilities 949.50 Accounts Payable 11,948.00 Unearned Revenue 20,500.00 Total Current Liabilities 8,400.00 6,000.00 47,797.50 Note Payable Total Liabilities 20,000.00 Stockholders' Equity 20,000.00 Common Stock Retained Earnings 67,797.50 Total Liabilities and Stockholders' Equity $ $ $ 5,000.00 200.00 5,200.00 $ $ 15,000.00 20,200.00 $ $ $ 30,000.00 17,597.50 67,797.50 Anne's Beauty Salon, Inc Statement of Retained Earnings For the Month Ending December 31, 2015 Retained Earnings, December 1 Add: Net Income Subtract: Dividends Retained Earnings, December 31 $ $ $ $ 5,000.00 15,000.00 (2,402.50) 17,597.50