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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

On November 1, an exterior painting company received $5,310 for a paint job that will not be finished for a few months. As of December 31, which is the end of the fiscal period, $2,400 worth of painting will not have been completed. The bookkeeper completed the following entries prior to leaving on vacation:

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The owner wants to get a bank loan by December 1. The bank requires interim financial statements to be submitted as of December 1. How will the bookkeeper’s entries affect the accuracy of the interim balance sheet and income statements? What difference will the bookkeeper’s methods make in the December 31 balance sheet and income statement?

To determine

Explain the entries affect and difference of the interim balance sheet and income statements.

Explanation

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity...

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