Reference no: EM132672828

Racey has prepared an income statement for the 12-month reporting period ended 30 June on a cash basis, showing a $38,920 profit. The cash-based statement shows the following:

Sales $249,700

Inventory purchased 147,600

Gross profit 102,100

Expenses

Salary and wages 25,600

Administration 16,900

Rent 8,300

Advertising 5,000

Interest 4,280

Insurance 3,100

Additional information

1. The accounts receivable and accounts payable balances at the start of the reporting period were $14,800 and $8,800 respectively. At the end of the reporting period, Racey had accounts receivable of $19,100 and accounts payable of $17,780.
2. The opening inventory was $28,800 and the closing inventory was $34,200.
3. An advertising invoice of $2,660 had not been paid.
4. The business has equipment that cost $36,400. It has a useful life of 5 years and an expected salvage value of $4,000.
5. The insurance expense represents the 12-month premium on a policy that was taken out on 30 April.

Problem 1: Prepare an accrual-based income statement for Racey for the period ended 30 June.