Near the end of its first year of operations, December 31, 2021, Sheffield Designs Ltd. approached the local bank for a $19,500 loan and was asked to submit financial statements prepared on an accrual basis. Although the company kept no formal accounting records, it did maintain a record of cash receipts and payments. The following information is available for the year ended December 31: Cash Receipts Cash Payments Issue of common shares $ 22,000 Fees earned 152,600 Equipment $ 35,400 Supplies 9,300 Rent 21,710 Insurance 3,840 Income tax 6,400 Advertising 6,400 Salaries 59,300 Dividends declared 9,000 $174,600 $151,350 Additional information: 1. Fees from design work earned but not yet collected amounted to $2,630. 2. The equipment was purchased at the beginning of January and has an estimated six-year useful life. The company uses straight-line depreciation. 3. Supplies on hand on December 31 were $1,300. 4. Rent payments included a $1,650 per month rental fee and a $1,910 deposit that is refundable at the end of the two-year lease. (Hint: Use the Prepaid Rent account for the refundable deposit.) 5. The insurance was purchased on February 1 for a one-year period expiring January 31, 2022. 6. Salaries earned for the last four days in December and to be paid in January 2022 amounted to $2,870. 7. At year end, it was determined that an additional $6,800 is owed for income tax. (a) Calculate total revenue, total expense, and net income that would be reported if Sheffield Designs used the cash basis of accounting. Total revenue $ Total expense $ Cash-based net income $

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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Question

Near the end of its first year of operations, December 31, 2021, Sheffield Designs Ltd. approached the local bank for a $19,500 loan and was asked to submit financial statements prepared on an accrual basis. Although the company kept no formal accounting records, it did maintain a record of cash receipts and payments. The following information is available for the year ended December 31:

	Cash Receipts	Cash Payments
Issue of common shares	$ 22,000
Fees earned	152,600
Equipment		$ 35,400
Supplies		9,300
Rent		21,710
Insurance		3,840
Income tax		6,400
Advertising		6,400
Salaries		59,300
Dividends declared		9,000
	$174,600	$151,350

Additional information:

1.		Fees from design work earned but not yet collected amounted to $2,630.
2.		The equipment was purchased at the beginning of January and has an estimated six-year useful life. The company uses straight-line depreciation.
3.		Supplies on hand on December 31 were $1,300.
4.		Rent payments included a $1,650 per month rental fee and a $1,910 deposit that is refundable at the end of the two-year lease. (Hint: Use the Prepaid Rent account for the refundable deposit.)
5.		The insurance was purchased on February 1 for a one-year period expiring January 31, 2022.
6.		Salaries earned for the last four days in December and to be paid in January 2022 amounted to $2,870.
7.		At year end, it was determined that an additional $6,800 is owed for income tax.