Establish an Excel Worksheet for the financial statement analysis framework. Refer to the following information: a. On...

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Accounting

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 thefinancial statement effect template, analyze the effects of theabove transactions on financial 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.
4. If Frances recognized "rent expense" instead of "prepaidrent" on Jan. 1, discuss the effect of this error on the financialstatements.

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1 & 2) EFFECT OF TRANSACTIONS ON FINANCIAL STATEMENTS AND ADJUSTMENTS FOR ACCRUAL ACCOUNTING:
	ASSETS			EQUALS	LIABILITIES AND SHAREHOLDERS EQUITY
Transaction	Cash	Prepaid Rent	Equipment	EQUALS	Accounts Payable	Salary payable	Unearned revenue	Capital	Expenses	DETAILS
a	200000			EQUALS				200000
b	-24000	24000		EQUALS
c				EQUALS	150000				-150000	Consulting Fees
d	-100000		100000	EQUALS
e	-66000			EQUALS		6000			-72000
f	20000			EQUALS			20000
Adjusting Entries:				EQUALS
b (rent expense)		-12000		EQUALS					-12000
d (depreciation)			-10000	EQUALS					-10000	For six months
TOTAL	30000	12000	90000	EQUALS	150000	6000	20000	200000	-244000
GROSS TOTAL			132000	EQUALS	132000



3) Financial Statements:

BALANCE SHEET :

LIABILITIES AND SH EQ.	Amounts $	ASSETS	Amounts $
Accounts Payable	150000	Cash	30000
Salary Payable	6000	Prepaid rent	12000
Unearned Revenue	20000	Equipment	90000
Capital	200000	Expenses	244000
Total Liabilities	376000	Total Assets	376000



4) If under transaction b, Rent expense is booked, then an adjustment for
Prepaid rent for the year 2015 has to be made, which should be:

Debit	Prepaid Rent	12000
Credit	Rent Expense		12000

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Transcribed Image Text

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 thefinancial statement effect template, analyze the effects of theabove transactions on financial 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 31,2014.4. If Frances recognized "rent expense" instead of "prepaidrent" on Jan. 1, discuss the effect of this error on the financialstatements.