E2.16 A small consulting firm had the following transactions over a two-month period, December 20X4 and January 20X5, and no other transactions. Client services were performed and billed during December 20X4 for total fees of $80,000. Of this amount, $30,000 was collected in December 20X4 and the balance was collected in January 20X5. Expenses incurred to service these clients during December 20X4 were $45,000, of which $20,000 was paid in December 20X4 and the remaining $25,000 was paid in January 20X5. a. Prepare two income statements for the month of December 20X4, one using an accrual-based approach and one using a cash-based approach. b. Which approach is in accordance with generally accepted accounting principles? E2.17 Label each of the following items as a capital expenditure or as a revenue expenditure. a. Salaries. b. Equipment. c. Advertising. d. Patents. e. Repair and maintenance (routine). f. Major building improvement or renovation. g. Land. E2.18 On January 1, 20X1, Emily's Boutique purchased equipment for $50,000 which is expected to have a 6-year useful life and a $5,000 salvage value. Using straight-line depreciation, a. what is the annual depreciation expense on this equipment? b. what is the monthly depreciation expense on this equipment? c. what is the annual depreciation expense on this equipment that will appear in the income statement for year ended December 31, 20X3? d. what is the accumulated depreciation on this equipment through December 31, 20X3? e. Show how this equipment will be presented in the Statement of Financial Position as of December 31, 20X3, under U.S. generally accepted accounting principles.