Near the end of its first year of operations, December 31, 2021, Vaughn Designs Ltd. approached the local bank for a $ 19,400 loan and was asked to submit financial statements prepared on an accrual basis. Although the company kept no formal accounting records, it did maintain a record of cash receipts and payments. The following information is available for the year ended December 31: Additional information: 1. Fees from design work earned but not yet collected amounted to $ 2,430. 2. The equipment was purchased at the beginning of January and has an estimated six-year useful life. The company uses straight-line depreciation. 3. Supplies on hand on December 31 were $ 1,230. 4. Rent payments included a $ 1,350 per month rental fee and a $ 1,880 deposit that is refundable at the end of the two-year lease. (Hint: Use the Prepaid Rent account for the refundable deposit.) 5. The insurance was purchased on February 1 for a one-year period expiring on January 31, 2022. 6. Salaries earned for the last four days in December and to be paid in January 2022 amounted to $ 3,000. 7. At year-end, it was determined that an additional $ 7,600 is owed for income tax. Cash Balance at Dec. 31 = 5580 Question: Please fill out

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 18MCQ

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Question

Near the end of its first year of operations, December 31, 2021, Vaughn Designs Ltd. approached the local bank for a $ 19,400 loan and was asked to submit financial statements prepared on an accrual basis. Although the company kept no formal accounting records, it did maintain a record of cash receipts and payments. The following information is available for the year ended December 31:

Additional information:

1.		Fees from design work earned but not yet collected amounted to $ 2,430.
2.		The equipment was purchased at the beginning of January and has an estimated six-year useful life. The company uses straight-line depreciation.
3.		Supplies on hand on December 31 were $ 1,230.
4.		Rent payments included a $ 1,350 per month rental fee and a $ 1,880 deposit that is refundable at the end of the two-year lease. (Hint: Use the Prepaid Rent account for the refundable deposit.)
5.		The insurance was purchased on February 1 for a one-year period expiring on January 31, 2022.
6.		Salaries earned for the last four days in December and to be paid in January 2022 amounted to $ 3,000.
7.		At year-end, it was determined that an additional $ 7,600 is owed for income tax.