Establish an excel worksheet for the financial statement analysis framework. Refer to the following financial information;

1. On January 1, 2019, Frances Corp. started doing business and the owners contributed $200,000 capital in cash.
2. The company paid $24,000 to cover the rent for the office space for the 24-month period from January 1, 2019 to December 31, 2020.
3. On March 1, 2019, MSK Inc. entered into a consulting contract under which Frances Corporation Contract under which Frances Corporation promised to provide consulting to MSK Inc. for the 10-month period from March 1, 2019 to December 31, 2019. In return, MSK promised to pay a monthly consulting fee of $15,000 which was to be paid in January, 2020. Frances fulfilled its contractual obligations during 2019.
4. On July 1, 2019, Frances purchased office equipment for $100,000 cash. The equipment has an estimated useful life of five years and no salvage value. The equipment was immediately placed into use. Frances uses the straight-line method proportion to the number of month’s usage.
5. Through November 30, 2019, the company had paid $66,000 to its employees for 11 months of salaries. Accrued salaries on December 31, 2019 were $6,000.
6. On December 31, 2019, Norbert Corporation advanced $20,000 to Frances Corporation for consulting services to be provided during 2020.

Questions:

1. For each transaction, using the financial statement effect template, analyze the effects of the above transactions of financial statement.
2. At the end of the year, analyze how the adjustment for accrual basis accounting affects the financial statement.
3. Prepare financial statements for the year ended December 31, 2019.
4. If Frances recognized ‘rent expense’ instead of ‘prepaid rent’ on January 1, discuss the effect of this error on the financial statement.

Answer rating: 100% (QA)

Rent Rent paid 24000 Period 24 months Rent expense for 2019 Jan to Dec 12000 Prepaid rent 12000 Offi... View the full answer