Question

Problem 3-2A Convert cash-basis accounting to accrual-basis accounting (LO3-1, 3-2) Minutemen Law Services maintains its books using cash-basis accounting. However, the company decides to borrow $100,000 from a local bank, and the bank requires Minutemen to provide annual financial statements prepared using accrual basis accounting as part of the credit worthiness verification. During 2021, the company records the following cash flows: $61,000 Cash collected from customers Cash paid for: Salaries Supplies Rent Insurance Utilities Net cash flows $35, 100 3,100 4,100 6,100 2,100 50,500 $10,500 You are able to determine the following information: January 1, 2021 $20,100 Accounts Receivable Prepaid Insurance Supplies Salaries Payable December 31, 2021 $22,200 3,250 1,550 3,500 4,100 2,250 Required: Prepare an accrual basis income statement for the year ended December 31, 2021, by calculating accrual basis revenues and expenses. < Prey 5 of 5 !! Next

Answer 1

working Notes : first lets revenue and accounts: calculate expenses the by amount preparing of the sales or following 09 Accounts Receivable Account To Balance b/dl $20, 100 Cash (collection) $61.000 To sales/ Revenue (Balancing figure) $63,100 By Balance eld $53200 $22 200 $63,200 en $ 6100 er. Prepaid Insurance Account To cash Prepard Expenses $2850 (Balancing figure) By Balance eld $3250 #6700 $6100 09. Supplies Account To Balonce bla $4100 By supplies Expenses $5650 To Cash $3100 (Balancing figure) By Balance eld $1550 $7200 1 $ 7200 Note: As Accounts Payable balances is not geven in this problem, et is assumed that total cost paid for supplies is the total amount of purchase.

e. D . Salories Payable Account $35100 By Balance b/d $2,250 To Cash By $36, 350 salaries Expenses (Baloncing fegure) To Balance eld $ 3500 $38 600 $38,600

MINUTEMEN LAW SERVICES Income Statement For the Year Ended December 31, 2021 Service Revenue : Revenue $63.100 Total Ravenue $63.100 Expenses & Salaries Expenses $36.350 Supplies Expenses 5,650 Rent Expenses 4100 Insurance Expenses 2850 uteleties Expenses 2100 Total Expenses $51050 Net Income $12050