Reference no: EM131909872

Question - The Morris Company uses cash-basis accounting for its records. During 2014, Morris collected $150,000 from its customers, made payments of $70,000 to its suppliers for merchandise inventory, and paid $40,000 for operating costs. Morris wants to prepare its financial statements on an accrual basis. In gathering information for the accrual- basis financial statements, Morris discovered the following:

- At the beginning of 2014, customers owed Morris $20,000 and Morris owed suppliers $7000.

- At the end of 2014, customers owed Morris $30,000, and Morris owed suppliers $11,000.

- Two years ago, Morris purchased equipment for $10,000. The equipment has a useful life of five years and no salvage value.

- For the year 2014, Morris's beginning inventory was $5000, and its ending inventory was $6500.

- At the beginning of 2014, Morris has prepaid rent of $3000. At the end of the year, Morris had prepaid rent of $500.

Required: Using accrual accounting, prepare an income statement for 2014 for Morris Company.