Establish an Excel Worksheet for the financial statementanalysis framework. Refer to the following information:

a. On January 1, 2014, Frances Corporation started doingbusiness and the owners contributed $200,000 capital in cash.

b. The company paid $24,000 to cover the rent for the officespace for the 24-month period from January 1, 2014 to December 31,2015.

c. On March 1, 2014, MSK Inc. entered into a consulting contractunder which Frances Corporation promised to provide consulting toMSK Inc. for the 10-month period from March 1, 2014, to December31, 2014. In return, MSK promised to pay a monthly consulting feeof $15,000, which was to be paid in January 2015. Frances fulfilledits contractual obligation during 2014.

d. On July 1, 2014, Frances purchased office equipment for$100,000 cash. The equipment has an estimated useful life of fiveyears and no salvage value. The equipment was immediately placedinto use. Frances uses the straight-line method of depreciation. Itrecords depreciation expense in proportion to the number of months’usage.

e. Through November 30, 2014, the company had paid $66,000 toits employees for 11 months of salaries. Accrued salaries onDecember 31, 2014, were $6,000.

f. On December 31, 2014, Norbert Corporation advanced $20,000 toFrances Corporation for consulting services to be provided during2015.

Questions:

1. For each of these transactions, using the financial statementeffect template, analyze the effects of the above transactions onfinancial statements.

2. At the end of the year, analyze how the adjustment foraccrual basis accounting affects the financial statements.

3. Prepare financial statements for the year ended December 31,2014.

(balance sheet / income statement/ cash flow statement)

4. If Frances recognized "rent expense" instead of "prepaidrent" on Jan. 1, discuss the effect of this error on the financialstatements.