Question 3

AC Corp. maintains its financial records on the cash basis of accounting. AC Corp. is trying to secure financing from an investor who wishes to see the financial information on accrual basis. You, the CPA of the firm, have been requested to convert the financial information to accrual basis. You are provided with the following summarized data covering 2016, 2017, and 2018 by the firm.

		2016		2017		2018
Cash Receipts from Sales
On 2016 Sales		$180,000		$55,000		$12,000
On 2017 Sales		41,000		195,000		63,000
On 2018 Sales		23,000		43,000		215,000
Cash Payments for Expenses
On 2016 Expenses		93,000		20,000		7,000
On 2017 Expenses		18,000		105,000		24,000
On 2018 Expenses		16,000		21,000		138,000

Instructions:

1. Using the data above, prepare abbreviated income statements for the years 2016 and 2017 on the accrual basis. (4 points)
2. Using the data above, calculate the ending balances in Accounts Receivable, Prepaid Expense, Unearned Revenue and Accrued Expense as of December 31, 2016. (6 points)