Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In July of this year, Stephen started a proprietorship called ECR. ERC uses the ACCRUAL METHOD of accounting. ECR collected $81,000 in cash for repairs

In July of this year, Stephen started a proprietorship called ECR. ERC uses the ACCRUAL METHOD of accounting.

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 isnt 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.

Prepare an Excel worksheet, to calculate taxable income for ECR for Year 1 using:

ACCRUAL METHOD OF ACCOUNTING

(Please use the accrual method of accounting. I asked this quesiton before and it was complete using the cash method which I already know how to complete)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Assessing Organizational Communication Strategic Communication Audits

Authors: Cal W. Downs, Allyson D. Adrian

1st Edition

1593850107, 978-1593850104

More Books

Students also viewed these Accounting questions

Question

3. Identify cultural universals in nonverbal communication.

Answered: 1 week ago