80.2K

Verified Solution

Link Copied!

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

Answer & Explanation Solved by verified expert

See Answer