Reference no: EM132672826

Question - Near the end of its first year of operations, December 31, 2021, Sheridan Designs Ltd. approached the local bank for a $21,000 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:

Cash Receipts Cash Payments Issue of common shares $19,800

Fees earned 153,200

Equipment $35,100

Supplies 8,700

Rent 19,230

Insurance 3,840

Income tax 6,300

Advertising 7,300

Salaries 58,800

Dividends declared 9,300 $173,000 $148,570

Additional information:

1. Fees from design work earned but not yet collected amounted to $2,200.

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 $1,220.

4. Rent payments included a $1,450 per month rental fee and a $1,830 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 January 31, 2022.

6. Salaries earned for the last four days in December and to be paid in January 2022 amounted to $2,740.

7. At year end, it was determined that an additional $6,900 is owed for income tax.

Required - Calculate total revenue, total expense, and net income that would be reported if Sheridan Designs used the cash basis of accounting.