Question

1041.42 CP4-6 Using Financial Reports: Analyzing Financial Information in a Sale of a Business (A Challenging Case) Robert Brissette, a local massage therapist, decided to sell his practice and retire. He has had discussions with a therapist from another province who wants to relocate. The discussions are at the complex stage of agreeing on a price. The financial statements of Robert's practice, Brissette Stress Reduction, played an important role in this process. Robert's secretary, Keisey Doucette, maintained the records, under his direction. Each year, Kelsey developed a statement of net earnings on a cash basis from the records she maintained, but she did not prepare a statement of financial position. Upon request, Robert provided the other therapist with the following statements for 2018 prepared by Kelsey:

Answer 1

Answer: Corrected statement of earning for 2018 of Brissette Stress Reduction. Items Cash basis per Brissectes statement Explanation of changes Corrected - Basis offees collected $1,30,000 fees collected includes & 106,000 $300wo for Priox Period that is to be excluded & also doent includes & Groo which is related to current Year fees so ($1300250 - 30000 + 36U2TO Expenses :- | Rent for office & 1950 1 18,000 Rent includes Rent for 13month, then Rent for a month & 1500 should be deducted (f.195w-322) Utilities expenses 4360 $ $60 82200 Telephone expenses $2340 Telephane bill doesn't include bill or sluo Telated to current flar ulrich should be added to current year telephone bill

Depreciation & gro depreciation is adjusted in income Statement, office salaries $23502 Csepenses salary of Kelsey is $ cuero, uliche adjusted as welale in statement of Easirings $ pucro & 900 office supplies expenses office supplies includes closing of suo & opening of $250 which should be adjusted as ;- ( $900 + $ 250- suw) $ 750 Miscellaneous Expenses a 1000 $140 Net earning 982100 $ 58350

I $58,350 is a correct net earning of Brissettes stress Reduction for the year 2018 based on accural Basis Rather than cash basis. This corrected statement of earning I shows the correct income & expenses incurred 1 in 2018 includes capesating or non-operating or cash or non- caste transaction , welch is I more reliable for Pricing decision.