Dina Richards opens a high-end stationery store, Stationery Plus, on November 1, 2008. She finances the store by investing $80,000 in cash in exchange for all the common stock of the firm. She also obtains a bank loan for $100,000, which she promises to repay in four equal installments of $25,000 at the end of each of the next four months, beginning December 31. The interest rate on the loan’s outstanding amount owed is 12% per year (or 1% per month); interest is to be paid along with each principal repayment. The store rents space, paying $9.000 for six months rent, and acquires goods costing $40,000. The supplier agrees to allow Stationery Plus to pay half ($20,000) immediately and half on December 15. To attract customers, the firm allows customers 40 days to pay for their purchases. Stationery Plus’s other monthly costs are $10,000 in salaries and $480 in utilities and insurance, all paid in cash at the end of every month. During November total sales to customers were $56,000: Stationary Plus had collected $23,000 by the end of November it collected the remainder by December 15. During December total sales to customers were $62,000: the firm had collected $34,000 by the end of December. So far, no customers have failed to pay the amount owed within 40 days. During December Stationery Plus acquired more merchandise costing $55,000, paying half immediately and agreeing to pay half in January. During November, Stationery Plus sold goods for which it had paid $29,000 and during December. Stationery Plus sold goods for which it had paid $33,600.
a. What is income for Stationery Plus for November 2008:
(1) Applying cash-basis accounting.
(2) Applying accrual accounting.
b. What is income for Stationery Plus for December 2008?
(1) Applying cash-basis accounting
(2) Applying accrual accounting.