PART I: Prepare Cash Basis Statements In December 2018, Amanda and Teresa acquired B-ME, Inc. and began operating the company on January 1, 2019. The balance sheet as of December, 31 2018 was: B-ME, Inc. BALANCE SHEET As of December 31, 2018 ASSETS LIABILITIES & EQUITY Current Assets: Current Liabilities: Cash 5,000 Accounts Payable Inventory Supplies 18,000 23,000 Long-term Liabilities: Bank Loan 63,000 Long-term Assets: Building & Equipment 200,000 Equity: Land 40,000 240,000 200,000 0 200,000 Total Assets 263,000 Total Liabilities & Equity 263,000 Common Stock Retained Earnings B-ME, Inc. CASH RECEIPTS & EXPENDITURES FOR 2019 Cash Receipts: 221,800 Sales Total Cash Receipts 221,800 Cash Disbursements: Wages & Salaries Expense 75,500 Heat, Light & Power Expenses 6,000 More supplies (i.e. more Inventory 42,600 Selling & Administrative Expenses 18,275 Payment on Loan (Principal) 13,000 Interest Expense on Loan 3,150 158,525 Increase in Cash 63,275 Total Cash Disbursements In January 2020, Amanda and Teresa collected all their receipts/paid invoices and prepared their cash receipts & expenditures for 2019 (see chart) and posted them in Quick Books. They just hired Ryan as their new bookkeeper and asked him to prepare a Balance Sheet and Income Statement for 2019. Question: What should Ryan's Cash Basis Balance Sheet and Income Statement for 2019 look like? Remember: they made no accruals...just cash entries. PART II: Prepare Year-end Accruals for 2019 Kristie, Amamda, Teresa & Ryan went to Tom, their Accountant, and asked him to review the inancials. Tom said... "Looks good, but there's no Cost of Goods Sold (i.e., Supplies used) and you need some accruals to get a "true picture" of 2019. After further discussion, they determined five (5) more journal entries would be needed. They are: 1. At the end of 2019, B-ME owed $18,875 to vendors for the purchase of supplies for which they had received (in addition to supplies already paid for) but were purchased on credit (plan to pay in the next 30 days). 2. Depreciation Expense on the Buildings and Equipment was $10,000 for 2019. 3. At the end of 2019, B-ME was owed $15,000 for services by customers who had not yet paid. They expected all of these customers would pay within 30 days (i.e., January 2019). 4. After taking inventory of supplies at the end of 2019, they determined that $60,250 were used (i.e., Cost of Goods Sold) in 2019. 5. Tom did some calculations and told them they would owe $14,203 in taxes for 2019. Question: What should their journal entries for 2019 be? YOUR ANSWER TO PART II: Year-end Accruals for 2019 B-ME, Inc. JE # Journal Entry Debit Credit 1. 2. 3. 4