Ellis Company keeps its accounting records on a cash basis during the year. At year-end, it adjusts its books to the accrual basis for preparing its financial statements. At the end of 2006, Ellis Company reported the following balance sheet items:

It is now the end of 2007. The company's checkbook shows a balance of $4,700, which includes cash receipts from customers of $51,300 and cash payments of $49,300.
An examination of the cash payments show that: (1) $30,600 was paid to suppliers, (2) $12,700 was paid for other operating costs (including $7,200 paid on January 1 for two years' annual rent), and (3) $6,000 was withdrawn by M. Ellis.
On December 31, 2007, (1) Customers owed Ellis Company $5,900, (2) Ellis Company owed suppliers and employees $7,000 and $900, respectively, and (3) The ending inventory was $6,300. Ellis is depreciating the equipment using straight-line depreciation over a 10-year life (no residual value).

Required
Using accrual-based accounting, prepare
(1) A 2007 income statement and
(2) A December 31, 2007 balance sheet (show supporting calculations).

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Debit $ 2,700 4,200 5,600 12,000 Credit Cash Accounts receivable Inventory Equipment Accumulated depreciation Accounts payable M. Ellis, capital $ 4,800 6,100 13,600 $24,500 $24,500 Totals