Please help me preparing income statement. Dr. Emma Armstrong, M.D., maintains t

ID: 2541671 • Letter: P

Question

Please help me preparing income statement.

Dr. Emma Armstrong, M.D., maintains the accounting records of the Blood Sugar Clinic on a cash basis. During 2017, Dr. Armstrong collected $146,000 in revenues and paid $55,470 in expenses. At January 1, 2017, and December 31, 2017, she had accounts receivable, unearned revenue, accrued liabilities, and prepaid expenses as follows (all long-lived assets are rented):

January 1

December 31

Accounts receivable

$9,250

$16,100

Unearned revenue

2,840

1,620

Accrued liabilities

3,435

2,200

Prepaid expenses

2,000

1,775

Instructions

Last week, Dr. Armstrong asked you, her CPA, to help her determine her income on the accrual basis. Write a letter to her explaining what you did to calculate net income on the accrual basis. Be sure to state net income on the accrual basis and to include a schedule of your calculations.

January 1

December 31

Accounts receivable

$9,250

$16,100

Unearned revenue

2,840

1,620

Accrued liabilities

3,435

2,200

Prepaid expenses

2,000

1,775

Explanation / Answer

Answer

Accounts receivables

Jan 1 balance

9250

(-) Revenues collected in cash

146000

(-) Closing balance 31 Dec

16100

Revenue billed on account

$152850

Unearned Revenue

Jan 1 Unearned revenues

2840

(-) Dec 31 balance

1620

Revenue to be recognised during 2017

$1220

Accrued Liabilities

Jan 1 balance of Accrued Liabilities

3435

(-) Expenses paid in cash

55470

(-) Closing balance Dec 31

2200

Expenses to be recognised in 2017

$54235

Prepaid Expenses

Jan 1 Opening Balance

2000

(-) 31 Dec balance

1775

Expenses expired during 2017

$225

Revenues:

Billed in 2017

152850

Unearned revenues now earned

1220

Total Revenues for 2017

$154070

Expenses:

Expenses to be recognised from Accrued liabilities

54235

Prepaid expenses expired

225

Total expenses for 2017

$54460

Net Income

$99610