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 creditworthiness verification. During 2018, the company records the following cash flows:
| Cash collected from customers |
|
|
|
$ |
70,000 |
|
| Cash paid for: |
|
|
|
|
|
|
| Salaries |
$ |
36,000 |
|
|
|
|
| Supplies |
|
4,000 |
|
|
|
|
| Rent |
|
5,000 |
|
|
|
|
| Insurance |
|
7,000 |
|
|
|
|
| Utilities |
|
3,000 |
|
|
55,000 |
|
| |
|
|
|
|
|
|
| Net cash flows |
|
|
|
$ |
15,000 |
|
| |
|
|
|
|
|
|
You are able to determine the following information:
| |
January 1, 2018 |
December 31, 2018 |
| Accounts Receivable |
$21,000 |
$24,000 |
| Prepaid Insurance |
0 |
3,700 |
| Supplies |
5,000 |
2,000 |
| Salaries Payable |
2,700 |
4,400 |
Required:
Prepare an accrual-basis income statement for the year ended December 31, 2018, by calculating accrual-basis revenues and expenses.