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Prepare the Income Statement for the year ended June

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Reference no: EM132802195

Question - Carpet Cleaning commenced its cleaning business on 1 July 2018. Detailed cash records have been kept and the following information is provided to you.

Carpet Cleaning - Statement of Cash Receipts and Cash Payments for 12 months ended 30 June 2020

Receipts

Revenue from Customers 555,000

Capital 150,000

Payments

Supplies purchased 145,000

Rent of premises 75,000

Advertising 18,000

Cleaning Equipment 38,000

Wages 50,000

Electricity 18,400

Owner's personal expenses 50,000

Office supplies expenses 34,000

Insurance on cleaning equipment 4,000

Additional Information -

Revenue from customers includes a deposit of $ 7,000 for a cleaning assignment booked for July 2020.

A 6 month advertising contract for $18,000 commenced on 1 April 2020.

New equipment was purchased on 1 July 2019. It has an expected life of 4 years with a trade-in value of $4,000. Use Straight Line Depreciation.

Office supplies on hand at 30 June 2020 were $14,000.

An amount of $6,000 is owed from a cleaning service provided on 20 June 2020.

Cleaning supplies on hand at 30 June 20120 amounted to $45,000.

Wages owed to employees for the month of June 2020 amounted to $6,000

Rent of premises is $5,000 per month, paid 3 months in advance.

Required -

[1] Using Accrual Accounting, prepare the Income Statement for the year ended 30 June 2020.

[2] Using Accrual Accounting, prepare the Balance Sheet at 30 June 2020.

[3] Explain why Balance Day adjustments are required when preparing general purpose financial reports.

Reference no: EM132802195

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