Problem 2-12 Cash versus accrual accounting [LO2-8]

Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the companys accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred during the year ended December 31, 2016:

Cash receipts:
From customers	$	635,000
Interest on note		3,360
Loan from a local bank		85,000
Total cash receipts	$	723,360
Cash disbursements:
Purchase of merchandise	$	382,000
Annual insurance payment		5,040
Payment of salaries and wages		202,000
Dividends paid to shareholders		10,000
Annual rent payment		20,000
Total cash disbursements	$	619,040

Selected balance sheet information:

	12/31/15			12/31/16
Cash	$	21,000		$	125,320
Accounts receivable		58,000			84,000
Inventory		72,000			58,000
Prepaid insurance		1,700			?
Prepaid rent		10,200			?
Interest receivable		2,520			?
Note receivable		42,000			42,000
Equipment		60,000			60,000
Accumulated depreciationequipment		(36,000	)		(42,000	)
Accounts payable (for merchandise)		106,000			114,000
Salaries and wages payable		19,200			22,500
Note payable		0			85,000
Interest payable		0			?

Additional information:
1.	On March 31, 2015, Zambrano lent a customer $42,000. Interest at 8% is payable annually on each March 31. Principal is due in 2019.
2.	The annual insurance payment is paid in advance on April 30. The policy period begins on May 1.
3.	On October 31, 2016, Zambrano borrowed $85,000 from a local bank. Principal and interest at 6% are due on October 31, 2017.
4.	Annual rent on the companys facilities is paid in advance on June 30. The rental period begins on July 1.

Required:

1.	Prepare an accrual basis income statement for 2016 (ignore income taxes). (Other expenses should be indicated with a minus sign.)