Critical Thinking Problem 12.2 (Algo) Net Profit LO 12-1, 12-2, 12-3, 12-4 When Sandra Michaels's father took seriously ill suddenly, Sandra had just completed the semester in college, so she stepped in to run the family business, ASAP Couriers, until it could be sold. Under her father's direction, the company was a successful operation and provided ample money to meet the family's needs. Sandra was majoring in biology in college and knew little about business or accounting, but she was eager to do a good job of running the business so it would command a good selling price. Since all of the services performed were paid in cash, Sandra figured that she would do all right as long as the Cash account increased. Thus, she was delighted to watch the cash balance increase from $23,359 at the beginning of the first month to $108,484 at the end of the second month-an increase of $85,125 during the two months she had been in charge. When she was presented an income statement for the two months by the company's bookkeeper, she could not understand why it did not show that amount as income but instead reported only $63,049 as net income. Knowing that you are taking an accounting class, Sandra brings the income statement, shown below, to you and asks if you can help her understand the difference. ASAP COURIERS Income Statement Months of June and July, 20x1 Operating Revenues Delivery Fees $259,000 Operating Expenses Salaries and Related Taxes $140,530 Gasoline and oil 27,888 Repairs Expense) 6,597 Supplies Expense 2,647 Insurance Expense 2,820 Depreciation Expense 15,469 Total Operating Expense 195,951 Net Income $ 63,049 In addition, Sandra permits you to examine the accounting records, which show that the balance of Salaries Payable was $2,605 at the beginning of the first month but had increased to $6,299 at the end of the second month. Most of the balance in the Insurance Expense account reflects monthly insurance payments covering only one month each. However, the Prepaid Insurance account had decreased $266 during the two months, and all supplies had been purchased before Sandra took over. The balances of the company's other asset and liability accounts showed no changes. Required: 2. Prepare a schedule that accounts for the difference between the increase in the Cash account balance and the net income for the two months. Increase in cash account Net income from income statement Difference Expense not requiring the use of cash: Depreciation expense Increase in salaries payable Decrease in supplies Difference +