Question
The various scenarios below involve issues that may arise for entities that prepare their financial statements using a special purpose framework (SPF). Required Provide the
The various scenarios below involve issues that may arise for entities that prepare their financial statements using a special purpose framework (SPF).
RequiredProvide the information requested in each scenario.
1. Silver Company is a cash method taxpayer and uses this basis for its financial statements. It has a 20% tax rate, began fiscal 2019 with retained earnings of $25,000, and has determined pre-tax amounts for fiscal 2019 as followsrevenues and expenses total $100,000 and $60,000, respectively, with the former including $10,000 in municipal bond interest. Silvers accountant is seeking your help in preparing its Statement of Revenues, Expenses, and Retained EarningsIncome Tax Basis.
What guidance should you offer the accountant? Express it by preparing a draft of the statement.
2. Gold Company is a small, privately owned business that uses the pure cash basis. Golds accountant has prepared a draft of its financial statement for your review, as presented below:
Gold Company Statement of Cash Flows For the Year Ended December 31, 2019
Net cash flows provided by operating activities $36,000 Net cash flows used in investing activities 24,000 Net cash flows provided by financing activities 15,000 Increase in cash 27,000 Cash, January 1, 2019 13,000 Cash, December 31, 2019 $40,000
What observations and suggested revisions, if any, should you share with the accountant?
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