Cash vs Accrual Homework
? Brooks Accessories maintains its books using cash-basis accounting. However, the company
recently borrowed $50,000 from a local bank and the bank requires Brooks to provide annual
financial statements prepared using accrual-basis accounting as part of the credit worthiness
verification. During 2021, the following cash flows were recorded:
Cash collected from customers
$60,000
Cash paid for:
Salaries
$25,000
Supplies
6,000
Maintenance
5,000
Insurance
7,000
Advertising
4,000
47,000
Cash-basis profit
$13,000
You are able to determine the following information:
January 1,
December 31,
2021
2021
Accounts receivable
$15,000
$18,000
Prepaid insurance
1,800
4,100
Supplies
800
-0-
Salaries payable
2,200
2,000
Required:
Prepare an accrual-basis income statement for December 31, 2021, by calculating accrual-basis
revenues and expenses.