Mr.Farah Hire began his new business, called Hire Systems Company, on July 1, 2009. The company is engaged in writing computer programs with special applications for businesses that own small computers. During the first six months of operation, the business was so successful that Farah had to hire new employees on several occasions. Yet he continually had to put off creditors because he lacked the funds to pay them. He wants to apply for bank loan, but after preparing a statement showing the totals of receipts of cash and payments of cash, he wonders whether a bank will make a loan to him on the basis of such apparently poor results. Deciding that he needs some accounting help, Farah asks you to review the statement and the company’s operating results.
After verifiying the information in Farah’s statement, you assemble the following additional facts about Hire Systems Company:
a. In addition to the amount received from customers, programming services totaling $ 9,700 had been performed but were not yet paid for.
b. Employees have been paid all the wages owed to them except for $ 350 earned since the last payday. The next regular payday is January 3.
c. The insurance expense represents a two-year policy purchased on July 1.
d. The rent expense represents $ 600 per month, including the rent for January.
e. In examining the expenditures for supplies, you find invoices for $ 650 that have not been paid, and an inventory reveals $ 875 of unused supplies still on hand.
f. The office equipment is fully paid for and it is estimated it will last 5 years and be worthless at the end of that time.
g. The computer rental agreement provides for a security deposit of $ 2,000 plus monthly payments of $ 1,000.
h. The maintenance expense represents a one-year maintenance agreement, paid in advance on July 1.
i. The service van expense represents the down payment on a van purchased on December 30 for $ 15,000. Prior to this...