Question

Claymore Corporation maintains its book on a cash basis. During 2021, the company collected $950,000 in fees from its clients and paid $662,000 in expenses. You are able to determine the following information about accounts receivable, supplies, prepaid rent, salaries payable, and interest payable:

December 31, 2021 December 31, 2020

Accounts receivable $110,000 $120,000

Supplies 18,000 15,000

Prepaid rent 11,000 13,000

Deferred revenue 20,000 18,000

Interest receivable 25,000 22,000

Prepaid Insurance 15,000 17,000

Deferred rent revenue 22.000 26,000

Salaries payable 16,000 18,000

Interest payable 6,000 5,000

In addition, 2021 depreciation expense on office equipment is $20,000.

Copy the statement below and answer in the same format.

Required: Determine accrual-basis 1.) revenue and 2.) expense

Answer 1

1. Accrual basis revenue : $ 945,000

Amount collected from clients	$ 950,000
Add: Increase in interest receivable	3,000
Add: Decrease in deferred rent revenue	4,000
Less: Decrease in accounts receivable	10,000
Less: Increase in deferred revenue	2,000
Accrual basis revenue	$ 945,000

2. Accrual basis expense: $ 682,000

Cash paid for expenses	$ 662,000
Add:
Decrease in prepaid rent	2,000
Decrease in prepaid insurance	2,000
Increase in interest payable	1,000
Depreciation expense	20,000
Less
Increase in supplies	3,000
Decrease in salaries payable	2,000
Accrual basis expenses	$ 682,000

Cash basis net income ( 950,000 - 662,000)	$ 288,000
Add:
Increase in supplies	3,000
Decrease in deferred rent revenue	4,000
Decrease in salaries payable	2,000
Increase in interest receivable	3,000
Deduct
Decrease in accounts receivable	10,000
Decrease in prepaid rent	2,000
Decrease in prepaid insurance	2,000
Increase in deferred revenue	2,000
Increase in interest payable	1,000
Depreciation expense	20,000
Accrual basis net income	$ 263,000