Question
Stanley and Jones Lawn Service Company (S&J) maintains its books on a cash basis. However, the company recently borrowed $120,000 from a local bank, and
Stanley and Jones Lawn Service Company (S&J) maintains its books on a cash basis. However, the company recently borrowed $120,000 from a local bank, and the bank requires S&J to provide annual financial statements prepared on an accrual basis. During 2021, the following cash flows were recorded:
Cash collected for: Services to customers | $ | 340,000 | |||
Cash paid for: | |||||
Salaries | $ | 182,000 | |||
Supplies | 27,000 | ||||
Rent | 11,000 | ||||
Insurance | 8,000 | ||||
Miscellaneous | 22,000 | 250,000 | |||
Net operating cash flow | $ | 90,000 | |||
You are able to determine the following information about accounts receivable, prepaid expenses, and accrued liabilities:
January 1, 2021 | December 31, 2021 | |||||
Accounts receivable | $ | 34,000 | $ | 28,000 | ||
Prepaid insurance | 0 | 2,200 | ||||
Supplies | 1,200 | 1,600 | ||||
Accrued liabilities (for miscellaneous expenses) | 2,600 | 3,200 | ||||
In addition, you learn that the bank loan was dated September 30, 2021, with principal and interest at 6% due in one year. Depreciation on the companys equipment is $12,000 for the year. Required: Prepare an accrual basis income statement for 2021. (Ignore income taxes.)
STANLEY AND JONES LAWN SERVICE COMPANY | ||
Income Statement | ||
For the Year Ended December 31, 2021 | ||
Sales revenue | ||
Operating expenses: | ||
Salaries expense | ||
Supplies expense | ||
Rent expense | ||
Insurance expense | ||
Miscellaneous expense | ||
Depreciation expense | ||
Total operating expenses | ||
Operating income | ||
Other expense: | ||
Interest expense | ||
Net income |
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