The following cash-basis income statement has been prepared for the first year of business.
Smart Mail, Inc.
Statement of Cash Receipts and Expenditures
For the Year Ending December 31, Year 1
Cash Receipts from Sales of Merchandise
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$25,000
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Less:
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Cash Expenditures for Merchandise and Services
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Merchandise
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$10,000
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Salaries
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5,000
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Rent
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7,000
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Total Cash Expenditures
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22,000
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Excess of Cash Receipts over Cash Expenditures
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$ 3,000
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At year-end, the firm had inventory with a cost of $2,000 remaining. Also, customers owed $1,000 for goods that had already been delivered. The utilities for December were $500 and were billed to but not yet paid by the company. The rent of $3,500 for January, Year 2, was paid in December, Year 1.
Required:
Prepare an accrual-basis income statement for the year.
