> Decision Case 3-1 One year ago, Tyler Stasney founded Swift Classified Ads. Stasney remembers that you took an accounting course while in college and comes to you for advice. He wishes to know how much net income his business carned during the past year in order to decide whether to keep the company going. His accounting records consist of the T-accounts from his ledger, which were prepared by an accountant who moved to another city. The ledger at December 31 follows. The accounts have not been adjusted. Salaries Expense Accounts Payable 121,500 Dec. 31 Cash Common Stock Dec 31 5,800 20,000 Dec 31 Dec 31 17,000 Dividends Depreciation Expense-Equipment Accounts Receivable Unearned Revenue Dec 31 12,000| 4,000 Dec. 31 Dec. 31 28,000| Salaries Payable Prepaid Rent 2,800 Service Revenue Rent Expense 59,500 Dec 31 Jan. 2 Office Supplies Jan. 2 2,600| Utilities Expense Dec 31 800 Supplies Expense Equipment Jan. 2 36,000 Accumulated Depreciation-Equipment Stasney indicates that at year-end, customers owe the business $1,600 for accrued service revenue. These revenues have not been recorded. During the year, Swift Classified Ads collected $4,000 service revenue in advance from customers, but the business earned only $900 of that amount. Rent expense for the year was $2,400, and the business used up $1,700 of the supplies. Swift determines that depreciation on its equipment was $5,000 for the year. At December 31, the business owes an employee $1,200 accrued salary. Help Swift Classified Ads compute its net income for the year. Advise Stasney whether to continue operating Swift Classified Ads. CHAPTER 3

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Calculate the net income for the year and post it on the Discussion Board, as well as all supporting documentation to arrive at the net income.
- Each group will also advise Tyler Stasney whether to continue operating Swift Classified Ads and post their advice on the Discussion Board, writing a minimum of two to three sentences on the Discussion Board.

> Decision Case 3-1
One year ago, Tyler Stasney founded Swift Classified Ads. Stasney remembers that
you took an accounting course while in college and comes to you for advice. He
wishes to know how much net income his business carned during the past year in
order to decide whether to keep the company going. His accounting records consist
of the T-accounts from his ledger, which were prepared by an accountant who
moved to another city. The ledger at December 31 follows. The accounts have not
been adjusted.
Salaries Expense
Accounts Payable
121,500 Dec. 31
Cash
Common Stock
Dec 31 5,800
20,000 Dec 31 Dec 31 17,000
Dividends
Depreciation
Expense-Equipment
Accounts Receivable
Unearned Revenue
Dec 31 12,000|
4,000 Dec. 31 Dec. 31 28,000|
Salaries Payable
Prepaid Rent
2,800
Service Revenue
Rent Expense
59,500 Dec 31
Jan. 2
Office Supplies
Jan. 2 2,600|
Utilities Expense
Dec 31 800
Supplies Expense
Equipment
Jan. 2 36,000
Accumulated
Depreciation-Equipment
Stasney indicates that at year-end, customers owe the business $1,600 for
accrued service revenue. These revenues have not been recorded. During the year,
Swift Classified Ads collected $4,000 service revenue in advance from customers, but
the business earned only $900 of that amount. Rent expense for the year was $2,400,
and the business used up $1,700 of the supplies. Swift determines that depreciation
on its equipment was $5,000 for the year. At December 31, the business owes an
employee $1,200 accrued salary.
Help Swift Classified Ads compute its net income for the year. Advise Stasney
whether to continue operating Swift Classified Ads.
CHAPTER 3

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