The Morris Company Uses Cash-Basis Accounting for Its Records

question 116

Essay

The Morris Company uses cash-basis accounting for its records. During 2015, Morris collected $150,000 from its customers, made payments of $70,000 to its suppliers for merchandise inventory, and paid $40,000 for operating costs. Morris wants to prepare its financial statements on an accrual basis. In gathering information for the accrual- basis financial statements, Morris discovered the following:
· At the beginning of 2015, customers owed Morris $20,000, and Morris owed suppliers
$7,000.
· At the end of 2015, customers owed Morris $30,000, and Morris owed suppliers $11,000.
· Two years ago, Morris purchased equipment for $10,000. The equipment has a useful life of five years and no salvage value.
· For the year 2015, Morris's beginning inventory was $5,000, and its ending inventory was
$6,500.
· At the beginning of 2015, Morris had prepaid rent of $3,000. At the end of the year, Morris had prepaid rent of $500.
Required:
Using accrual accounting, prepare an income statement for 2015 for Morris Company.

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Definitions:

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The document adopted on July 4, 1776, by the Second Continental Congress, declaring the Thirteen American Colonies independent from British rule.

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The convention of delegates from the Thirteen Colonies that started meeting in the spring of 1775, soon after the outbreak of the American Revolutionary War, which eventually declared independence.

Thomas Jefferson

The third President of the United States (1801–1809), primary author of the Declaration of Independence, and a founding father known for his promotion of the ideals of republicanism in the United States.