At January 1 (beginning of its fiscal year), Conover, Inc., a financial services consulting firm, reported the following account balances (in thousands of dollars, except number of shares and par value per share):

Required:
1. Create T-accounts for the balance sheet accounts and for these additional accounts: Consulting Fees Revenue, Interest Revenue, Salaries Expense, and Utilities Expense. Enter the beginning balances of the balance sheet accounts; Conover's income statement accounts had zero balances.
2. Enter the following transactions for the current year into the T-accounts, using the letter of each transaction as the reference:
a. Received $9,500 cash for consulting services rendered.
b. Issued 10,000 additional shares of common stock at a market price of $120 per share.
c. Purchased $640 of equipment, paying 25 percent in cash and owing the rest on a short-term note.
d. Received $890 from clients for consulting services to be performed in the next year.
e. Bought $470 of supplies on account.
f. Incurred and paid $1,800 in utilities for the current year.
g. Consulted for clients in the current year for fees totaling $1,620, due from clients in the next year.
h. Received $2,980 from clients paying on their accounts.
i. Incurred $6,210 in salaries in the current year, paying $5,300 and owing the rest (to be paid next year).
j. Purchased $1,230 in short-term investments and paid $800 for insurance coverage beginning in the next fiscal year.
k. Received $10 in interest revenue earned in the current year on short-term investments.
3. Using the data from the T-accounts, amounts for the following at the end of the current year were
Revenues $ _____ -Expenses $ _____ = Net Income $ _____
Assets $ ______ = Liabilities $ _____ + Stockholders' Equity $ _____
4. What would net income be if Conover, Inc., used the cash basis of accounting? Why does this differ from accrual basis net income (in requirement 3)?

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Cash Short-term investments Accounts receivable Supplies Prepaid expenses Office equipment Accumulated depreciation office equipment (60 This account has a credit balance representing the portion of the cost of the equipment used in the past. $1,900 Accounts payable S 210 1,320 870 780 50 6,560 2,010 410 Unearned revenue 3.570 Salaries payable 150 Short-term note payable 4,720 1,530 Common stock ($1 par value) Additional paid-in capital 480) Retained earnings