Reference no: EM132915085

Question -

a. On January 1, 2018, Francis Corporation started business and the owners contributed $200,000 capital in cash.

b. The company paid $24,000 to cover the rent for the office space for the 24-month period from January 1, 2018 to December 31, 2019.

c. On March 1, 2018, MSK Inc. entered into a consulting contract under which Francis Corporation promised to provide consulting to MSK Inc. for the 10-month period from March 1, 2018 to December 31, 2018. In return, MSK promised to pay a monthly consulting fee of $15,000, which was to be paid (the entire amount of $150,000) in January 2019. Francis fulfilled its contractual obligation during 2018.

d. On July 1, 2018, Francis purchased office equipment for $100,000 cash. The equipment has an estimated useful life of 5 years and no salvage value. The equipment was immediately placed into use. Francis uses straight-line depreciation. Francis records depreciation expense in proportion to the number of months' usage.

e. Through November 30, 2018, the company had paid $66,000 to its employees for 11 months of salaries. Accrued salaries on December 31, 2018, were $6,000.

f. On December 31, 2018, Nor Corporation advanced $20,000 to Francis Corporation for consulting services to be provided during 2019. (Treat the $20,000 as unearned revenue)

Required -

i. Prepare an income statement for the year ended December 31, 2018.

ii. Prepare a balance sheet as of December 31, 2018.

iii. Prepare the CFO section of the cash flow statement, using the DIRECT method.

iv. Repeat (iii) under the INDIRECT method.