Question
Stanley and Jones Lawn Service Company (S&J) maintains its books on a cash basis. However, the company recently borrowed $240,000 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 $240,000 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 $ 460,000 Cash paid for: Salaries $ 194,000 Supplies 39,000 Rent 23,000 Insurance 6,000 Miscellaneous 34,000 296,000 Net operating cash flow $ 164,000 You are able to determine the following information about accounts receivable, prepaid expenses, and accrued liabilities: January 1, 2021 December 31, 2021 Accounts receivable $ 35,000 $ 28,500 Prepaid insurance 0 3,400 Supplies 2,400 3,250 Accrued liabilities (for miscellaneous expenses) 3,800 5,600 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 $13,000 for the year. Required:
Prepare an accrual basis income statement for 2021. (Ignore income taxes.)
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