R3 Operating Decisions and the Accounting System ounts, and Computing Cash versus incial services consulting firm, reported the E3-13 Recording Journal Entries, Posting Effects to T-Accounts, and Computing 03-3, 3-4 Accrual Basis Net Income At January 1 (beginning of its fiscal year), Conover. Inc., a financial services consulting following account balances (in thousands, except for par and market value per share Cash $ 210 $ 1,900 Accounts payable Short-term investments 1,320 410 Uncarned revenue 870 Accounts receivable 3.570 Salaries payable while 780 Supplies 150 Short-term note payable Prepaid expenses 4.720 Common stock ($1 par value) 50 Office equipment 1.530 Additional paid-in capital 6,560 Accumulated depreciation-office equipment (480) Retained carnings 2.010 "This account has a credit balance representing the portion of the cost of the equipment used in the past Required: 1. Prepare journal entries for the following transactions for the current year. Use the balance sheet account titles above and the revenue or expense account titles mentioned in requirement (2) a. Received $9,500 cash for consulting services rendered. b. Issued 10 additional shares of common stock at a market price of $120 per share. c. Purchased $640 of office equipment, paying 25 percent in cash and owing the rest on a short-term note. d. Received $890 from clients for consulting services to be performed in the next year. e. Bought $470 of supplies on account . Incurred and paid $1,800 in utilities for the current year. g. Consulted for clients in the current year for fees totaling $1,620, due from clients in the next year. h. Received $2,980 from clients paying on their accounts. 1 Incurred $6,210 in salaries in the current year, paying $5,300 and owing the rest (to be paid next year). 3. Purchased $1,230 in short-term investments and paid $800 for insurance coverage beginning in the next fiscal year. k. Received $10 in interest revenue earned in the current year on short-term investments. 2. Create Taccounts for the balance sheet accounts and for these additional accounts: Consulting Fees Revenue, Interest Revenue, Salaries Expense, and Utilities Expense. Enter the beginning balances of the balance sheet accounts. Conover's income statement accounts had zero balances. Post the journal entry effects in requirement (1) above into the T-accounts, using the letter of each transaction as the reference. 3. Using the data from the T-accounts, amounts for the following at the end of the current year were Revenues $ - Expenses $_ = Net Income $ Assets $ = Liabilities $_ + Stockholders' Equity $ 4. What would net income be if Conover, Inc., used the cash basis of accounting? Why does this differ from accrual basis net income (in requirement (3)]? R3 Operating Decisions and the Accounting System ounts, and Computing Cash versus incial services consulting firm, reported the E3-13 Recording Journal Entries, Posting Effects to T-Accounts, and Computing 03-3, 3-4 Accrual Basis Net Income At January 1 (beginning of its fiscal year), Conover. Inc., a financial services consulting following account balances (in thousands, except for par and market value per share Cash $ 210 $ 1,900 Accounts payable Short-term investments 1,320 410 Uncarned revenue 870 Accounts receivable 3.570 Salaries payable while 780 Supplies 150 Short-term note payable Prepaid expenses 4.720 Common stock ($1 par value) 50 Office equipment 1.530 Additional paid-in capital 6,560 Accumulated depreciation-office equipment (480) Retained carnings 2.010 "This account has a credit balance representing the portion of the cost of the equipment used in the past Required: 1. Prepare journal entries for the following transactions for the current year. Use the balance sheet account titles above and the revenue or expense account titles mentioned in requirement (2) a. Received $9,500 cash for consulting services rendered. b. Issued 10 additional shares of common stock at a market price of $120 per share. c. Purchased $640 of office equipment, paying 25 percent in cash and owing the rest on a short-term note. d. Received $890 from clients for consulting services to be performed in the next year. e. Bought $470 of supplies on account . Incurred and paid $1,800 in utilities for the current year. g. Consulted for clients in the current year for fees totaling $1,620, due from clients in the next year. h. Received $2,980 from clients paying on their accounts. 1 Incurred $6,210 in salaries in the current year, paying $5,300 and owing the rest (to be paid next year). 3. Purchased $1,230 in short-term investments and paid $800 for insurance coverage beginning in the next fiscal year. k. Received $10 in interest revenue earned in the current year on short-term investments. 2. Create Taccounts for the balance sheet accounts and for these additional accounts: Consulting Fees Revenue, Interest Revenue, Salaries Expense, and Utilities Expense. Enter the beginning balances of the balance sheet accounts. Conover's income statement accounts had zero balances. Post the journal entry effects in requirement (1) above into the T-accounts, using the letter of each transaction as the reference. 3. Using the data from the T-accounts, amounts for the following at the end of the current year were Revenues $ - Expenses $_ = Net Income $ Assets $ = Liabilities $_ + Stockholders' Equity $ 4. What would net income be if Conover, Inc., used the cash basis of accounting? Why does this differ from accrual basis net income (in requirement (3)]