On January I 2014 Caroline Lampron and Jenni Meno

formed #1864
On January I, 2014, Caroline Lampron and Jenni Meno formed a computer sales and service
enterprise in Montreal by investing $90,000 cash. The new company, Razorback Sales and
Service, has the following transactions inJanuary:l. Paid $6,000 in advance for three months'
rent of office, showroom, and repair space.2. Purchased 40 personal computers at a cost
of51,500 each, six graphics computers at a cost of53,000 each, and 25 printers at a cost of
$450 each, paying cash on delivery.3. Sales, repair, and office employees earned $ 12,600 in
salaries during January, of which 53,000 was still payable at the end of January.4. Sold 30
personal computers for 52,550 each, four graphics computers for $4,500 each, and 15 printers
for $750 each. Of the sales amounts, 575,000 was received in cash in January and 530,750
was sold on a deferred payment plan.5. Other operating expenses of $8,400 were incurred and
paid for during January; $2,000 of incurred expenses were payable at January
31.Instructions(a) Using the transaction data above, prepare (1) a cash basis income statement
and (2) an accrual basis income statement for the month of January.(b) Using the transaction
data above, prepare (1) a cash basis balance sheet and (2) an accrual basis balance sheet as
atJanuary 31, 2014.(c) Identify the items in the cash basis financial statements that make cash
basis accounting inconsistent with the theory underlying the elements of financial
statements.View Solution:
On January I 2014 Caroline Lampron and Jenni Meno formed

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