Question - Horned Frogs Fine Cooking maintains its books using cash-basis accounting. However, the company recently borrowed $50,000 from a local bank, and the bank requires the company to provide annual financial statements prepared using accrual-basis accounting as part of the creditworthiness verification. During 2018, the company records the following cash flows:
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Cash collected from customers
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$65,000
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Cash paid for:
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|
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Salaries
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$23,000
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|
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Supplies
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9,000
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Repairs and maintenance
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8,000
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Insurance
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4,000
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|
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Advertising
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6,000
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50,000
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Net cash flows
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$15,000
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You are able to determine the following information:
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January 1, 2018
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December 31, 2018
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Accounts Receivable
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$10,000
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$13,000
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Prepaid insurance
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1,700
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4,200
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Supplies
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-0-
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2,000
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Salaries Payable
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4,200
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2,800
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Required: Prepare an accrual-basis income statement for December 31, 2018, by calculating accrual-basis revenues and expenses.