TWW110
Sep 28, 2008, 07:58 PM
I have to convert a cash basis financial statement to the accrual basis statement for year end December 31, 2009
This is what I was given (see bottom for what I came up for the problem)
1. Comprehensive insurance policy requires a payment every year for the upcoming year. The last payment of $12,000 was made on September 1, 2009
2. Mr. Kincaid allows customer to pay using a credit card. At the end of the current year, various credit card companies owed Mr. Kincaid $6,500. At the end of last year, customer credit card charges outstanding were $5,000
3. Employees are paid once a month on the 10th of the month following the work period. Cash disbursements to employees were $8,200 and $7,200 for January 10, 2010 and January 10, 2009 respectively.
4. Utility bills outstanding totaled $1,200 at the end of 2009 and $900 at the end of 2008.
5. A physical count of inventory is always taken at the end of the fiscal year. The merchandise on hand at the end of 2009 costs $35,000. At the end of 2008, inventory on hand cost $32,000
6. At the end of 2008, Mr. Kincaid does not have any bills outstanding to suppliers of merchandise. However at the end of 2009, he owed suppliers $4,000
Mr. Kincaid's 2009 cash basis net income (including depreciation expense) is $26,000. Determine net income by applying the accrual accounting method.
Would assets, liabilities, and owner's equity be higher or lower and by what amount?
I have completed the following:
December 31, 2008 December 31, 2009
Accounts Receivable (credit card) 5,000 6,500
Accrued Liabilities (employee salary) 7,200 8,200
Accrued Liabilities (utilities) 900 1,200
Inventory 32,000 35,000
Bills Outstanding 0 4,000
I'm not sure how to do the prepaid insurance since it was paid September 1st, 2009. All I can come up with was that the December 31, 2008 balance is 8,000 and December 31, 2009 balance is 8,000. $12,000 x 4/12 (Sept 1st to Dec 31) = $4,000 expense paid $12,000 - $4,000 = 8,000
Please help! I'm confused
This is what I was given (see bottom for what I came up for the problem)
1. Comprehensive insurance policy requires a payment every year for the upcoming year. The last payment of $12,000 was made on September 1, 2009
2. Mr. Kincaid allows customer to pay using a credit card. At the end of the current year, various credit card companies owed Mr. Kincaid $6,500. At the end of last year, customer credit card charges outstanding were $5,000
3. Employees are paid once a month on the 10th of the month following the work period. Cash disbursements to employees were $8,200 and $7,200 for January 10, 2010 and January 10, 2009 respectively.
4. Utility bills outstanding totaled $1,200 at the end of 2009 and $900 at the end of 2008.
5. A physical count of inventory is always taken at the end of the fiscal year. The merchandise on hand at the end of 2009 costs $35,000. At the end of 2008, inventory on hand cost $32,000
6. At the end of 2008, Mr. Kincaid does not have any bills outstanding to suppliers of merchandise. However at the end of 2009, he owed suppliers $4,000
Mr. Kincaid's 2009 cash basis net income (including depreciation expense) is $26,000. Determine net income by applying the accrual accounting method.
Would assets, liabilities, and owner's equity be higher or lower and by what amount?
I have completed the following:
December 31, 2008 December 31, 2009
Accounts Receivable (credit card) 5,000 6,500
Accrued Liabilities (employee salary) 7,200 8,200
Accrued Liabilities (utilities) 900 1,200
Inventory 32,000 35,000
Bills Outstanding 0 4,000
I'm not sure how to do the prepaid insurance since it was paid September 1st, 2009. All I can come up with was that the December 31, 2008 balance is 8,000 and December 31, 2009 balance is 8,000. $12,000 x 4/12 (Sept 1st to Dec 31) = $4,000 expense paid $12,000 - $4,000 = 8,000
Please help! I'm confused