2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Nelson incorporated her business on January...

Transcribed Image Text:

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Nelson incorporated her business on January 1, 2020, under the name Nelson Consulting. She used $10,000 of her savings to start the business, receiving 1,000 shares of $1 par common stock. The following information is provided about her 2020 business activities and year-end adjustments 12: On January 1, 2020, Nelson borrowed $20,000 from the Citizens National Bank, under the following terms: principal due January 1, 2021; interest rate is 10% per year, with interest paid semiannually on June 30 and December 31 (1.e., 5% cash payment every six months). Nelson made both the June & December interest payments as scheduled. Nelson incurred $22,000 in miscellaneous administrative expenses during the year. Of these, she owed $5,000 at year-end. Nelson paid federal income taxes of $19,000. Nelson paid herself a $1,800 salary per month. (Ignore payroll taxes and other payroll-related expenses.) Information for year-end adjustments: Of the $3,500 in supplies purchased in 2020, supplies costing $750 were still on hand at December 31, 2020. 13. On January 1, Nelson paid $25,000 cash for computers and other high-tech office equipment. Because of the rapid obsolescence of computer-related equipment, she estimates that the equipment has a three-year life with an estimated $1,000 salvage value. Nelson uses straight-line depreciation [Hint: Depreciation expense = (cost-salvage value)/useful life] On January 1, Nelson signed a one-year lease on office space at $900 per month, with rent due on the first day of each month. Nelson made the rent payments during 2020 as scheduled. Because Nelson's business is a service business, she has no inventory. Clients buy any needed equipment directly from other vendors. During 2020, Nelson purchased $3,500 in miscellaneous office supplies, accounting for the purchase as a current asset - Supplies. Nelson billed clients for $190,000 in services performed during 2020, and she collected $115,000. Nelson's services were not subject to sales tax. Nelson incurred $26,000 in advertising expenses during 2020. She owed $8,000 of that amount to the advertising agency at December 31, 2020. She intends to pay the balance owed in January 2021. At December 31, 2020, Nelson decided that one accounts receivable for $6,500 would not be collected, and that the remaining accounts receivable would be collected in 2021. The $6.500 accounts receivable was charged to bad debt expense. At year-end, Nelson recorded straight-line depreciation on the assets purchased in # 3. Required: Prepare the income statement and balance sheet for Nelson Consulting as of December 31, 2020 (her first year of operations). 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Nelson incorporated her business on January 1, 2020, under the name Nelson Consulting. She used $10,000 of her savings to start the business, receiving 1,000 shares of $1 par common stock. The following information is provided about her 2020 business activities and year-end adjustments 12: On January 1, 2020, Nelson borrowed $20,000 from the Citizens National Bank, under the following terms: principal due January 1, 2021; interest rate is 10% per year, with interest paid semiannually on June 30 and December 31 (1.e., 5% cash payment every six months). Nelson made both the June & December interest payments as scheduled. Nelson incurred $22,000 in miscellaneous administrative expenses during the year. Of these, she owed $5,000 at year-end. Nelson paid federal income taxes of $19,000. Nelson paid herself a $1,800 salary per month. (Ignore payroll taxes and other payroll-related expenses.) Information for year-end adjustments: Of the $3,500 in supplies purchased in 2020, supplies costing $750 were still on hand at December 31, 2020. 13. On January 1, Nelson paid $25,000 cash for computers and other high-tech office equipment. Because of the rapid obsolescence of computer-related equipment, she estimates that the equipment has a three-year life with an estimated $1,000 salvage value. Nelson uses straight-line depreciation [Hint: Depreciation expense = (cost-salvage value)/useful life] On January 1, Nelson signed a one-year lease on office space at $900 per month, with rent due on the first day of each month. Nelson made the rent payments during 2020 as scheduled. Because Nelson's business is a service business, she has no inventory. Clients buy any needed equipment directly from other vendors. During 2020, Nelson purchased $3,500 in miscellaneous office supplies, accounting for the purchase as a current asset - Supplies. Nelson billed clients for $190,000 in services performed during 2020, and she collected $115,000. Nelson's services were not subject to sales tax. Nelson incurred $26,000 in advertising expenses during 2020. She owed $8,000 of that amount to the advertising agency at December 31, 2020. She intends to pay the balance owed in January 2021. At December 31, 2020, Nelson decided that one accounts receivable for $6,500 would not be collected, and that the remaining accounts receivable would be collected in 2021. The $6.500 accounts receivable was charged to bad debt expense. At year-end, Nelson recorded straight-line depreciation on the assets purchased in # 3. Required: Prepare the income statement and balance sheet for Nelson Consulting as of December 31, 2020 (her first year of operations).