Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the

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Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the company's accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred during the year ended December 31, 2018:

Cash receipts:

From customers...............................................................$675,000

Interest on note....................................................................4,000

Loan from a local bank........................................................100,000

Total cash receipts............................................................$779,000

Cash disbursements:

Purchase of merchandise....................................................$390,000

Annual insurance payment......................................................6,000

Payment of salaries and wages..............................................210,000

Dividends paid to shareholders...............................................10,000

Annual rent payment...........................................................24,000

Total cash disbursements...................................................$640,000

Selected balance sheet information:

Zambrano Wholesale Corporation maintains its records on a cash basis.

Additional information:
1. On March 31, 2017, Zambrano lent a customer $50,000. Interest at 8% is payable annually on each March 31. Principal is due in 2021.
2. The annual insurance payment is paid in advance on April 30. The policy period begins on May 1.
3. On October 31, 2018, Zambrano borrowed $100,000 from a local bank. Principal and interest at 6% are due on October 31, 2019.
4. Annual rent on the company's facilities is paid in advance on June 30. The rental period begins on July 1.
Required:
1. Prepare an accrual basis income statement for 2018 (ignore income taxes).
2. Determine the following balance sheet amounts on December 31, 2018:
a. Prepaid insurance
b. Prepaid rent
c. Interest receivable
d. Interest payable

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 9781259722660

9th Edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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