Question

At January 1 (beginning of its fiscal year), Conover, Inc., a financial services consulting firm, reported the following account balances (in thousands, except for par and market value per share):

Cash	$	1,900	Accounts payable	$	210
Short-term investments		410	Unearned revenue		1,320
Accounts receivable		3,570	Salaries Payable		870
Supplies		150	Short-term note payable		780
Prepaid expenses		4,720	Common stock ($1 par value)		50
Office equipment		1,530	Additional paid-in capital		6,560
Accumulated depreciation-office equipment*		(480)	Retained earnings		2,010

*This account has a credit balance representing the portion of the cost of the equipment used in the past.

1. Received $9,500 cash for consulting services rendered.
2. Issued 10 additional shares of common stock at a market price of $120 per share.
3. Purchased $640 of office equipment, paying 25 percent in cash and owing the rest on a short-term note.
4. Received $890 from clients for consulting services to be performed in the next year.
5. Bought $470 of supplies on account.
6. Incurred and paid $1,800 in utilities for the current year.
7. Consulted for clients in the current year for fees totaling $1,620, due from clients in the next year.
8. Received $2,980 from clients paying on their accounts.
9. Incurred $6,210 in salaries in the current year, paying $5,300 and owing the rest (to be paid next year).
10. Purchased $1,230 in short-term investments and paid $800 for insurance coverage beginning in the next fiscal year.
11. Received $10 in interest revenue earned in the current year on short-term investments.

3. Using the data from the T-accounts, amounts for the following at the end of the current year were (Enter your answer in thousands, not in dollars.)

revenues-expenses=net income

Assets=liabilities+stock holders equity

Answer 1

Operating Revenues	Amount $
Consulting Fees revenue	$ 11120
Total operating revenues (A)	$ 11120
Operating expenses
Salaries expense	$ 6210
Utilities expense	$ 1800
Total operating expenses (B	$ 8010
Operating income (A - B)	$ 3110
Other item
Interest revenue	$ 10
Net income	$ 3120

1) Accounting is based on accrual concept. Revenue is recognized on this fundamental concept.

if we have received any advance for work but work is not performed yet and money received in advance are considered as a laibility and not revenue , thats a reason we have not consider $ 890 in revenue .

2) we have consider $ 1620 because we performed the services , so earned money thats a reason to consider this amount in revenue .

Total consulting fees revenue would be = 9500 + 1620 = $ 11,120

3) Only salaries expense that has been incurred for current year is recognized in income statement. The rest are ignored for income statement purposes.

Cash (1900+9500+1200-160 +890-1800+2980 -5300 -1230 -800+10	$	7190	Accounts payable (210+470)	$	680
Short-term investments (410+1230)		1640	Unearned revenue (1320+890		2210
Accounts receivable (3570-2980)+1620		2210	Salaries Payable (870+910)		1780
Supplies (150+470)		620	Short-term note payable (780+480		1260
Prepaid expenses (4720+800)		5520	Common stock ($1 par value)		50
Office equipment (1530+640)		2170	Additional paid-in capital (6560+1200)		7760
Accumulated depreciation-office equipment*		(480)	Retained earnings (2010+3120)		5130
		18870			18870

Assets=liabilities+stock holders equity

18870= 5930+12940