The McNally Company Uses Cash-Basis Accounting for Its Records

question 122

Essay

The McNally Company uses cash-basis accounting for its records. During 2015, McNally collected $500,000 from its customers, made payments of $200,000 to its suppliers for inventory, and paid $140,000 for operating costs. McNally wants to prepare accrual-basis financial statements. In gathering information for the accrual-basis financial statements, McNally discovered the following:
· Customers owed McNally $35,000 at the beginning of 2015 and $50,000 at the end of 2015.
· McNally owed suppliers $20,000 at the beginning of 2014 and $27,000 at the end of 2015.
· McNally's beginning inventory was $42,000, and its ending inventory was $44,000.
· McNally had prepaid expenses of $5,000 at the beginning of 2015 and $7,400 at the end of 2014.
· McNally had accrued expenses of $12,000 at the beginning of 2015 and $19,000 at the end of 2015.
· Depreciation for 2015 was $51,000.
Required:
Prepare an accrual-basis income statement for 2015 for McNally Company.

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