28) Max is having a problem understanding the financial statements. He believes that his administrative assistant has made some errors in preparing the income statement. Evaluate the following transactions and the income statement prepared by the administrative assistant. Prepare a corrected income statement using U.S. GAAP.
a.Max's Catering earned $10,000 in catering business during June.
b.Customers paid $2,500 in deposits for parties to be catered in July.
c.The business paid $500 for June rent.
d.The business paid the chef $5,000 in wages for June.
e.The business spent $3,300 on food, spices, and other ingredients, and used $1,500 of them during June.
Max's Catering
Income Statement
At June 2012
Revenues$12,500
Expenses
Rent$ 500
Wages5,000
Supplies3,300
Total expenses$(8,800)
Net income$ 3,700
29) Clean Sweep agreed to clean an office building on a weekly basis for $1,000 per week. The contract began on August 15, and Clean Sweep cleaned the building twice during August. Clean Sweep received $2,000 cash in September for the cleaning performed in August. How much revenue should Clean Sweep recognize in August using accrual accounting?
30) Clean Sweep agreed to clean an office building on a weekly basis for $1,000 per week. The contract began on August 15, and Clean Sweep cleaned the building twice during August. Clean Sweep received $2,000 cash in September for the cleaning performed in August. How much revenue should Clean Sweep recognize in August using cash-basis accounting?
31) Identify each of the following items as either an accrual or deferral.
a. Accrual
b. Deferral
_____ 1. Account receivable
_____ 2. Account payable
_____ 3. Prepaid insurance
_____ 4. Interest receivable
_____ 5. Prepaid advertising