Exercise 2–17 Stanley and Jones Lawn Service Company Income Statement For the Year Ended December 31, 2013 Sales revenue (1) ........................................... Operating expenses: Salaries ...................................................... Supplies (2) ................................................. Rent ........................................................... Insurance (3) .............................................. Miscellaneous (4) ....................................... Depreciation .............................................. Total operating expenses .............. Operating income ......................................... Other expense: Interest (5) ................................................... Net income ................................................... $315,000 $180,000 24,500 12,000 4,000 21,000 10,000 251,500 63,500 1,500 $62,000 (1) $320,000 cash collected less $5,000 decrease in accounts receivable. Cash ........................................................................ 320,000 Accounts receivable (decrease in account) .......... 5,000 Sales revenue (to balance) .................................... 315,000 (2) $25,000 cash paid for the purchase of supplies less $500 increase in supplies. Supplies expense (to balance) ................................. Supplies (increase in account) .................................. Cash ..................................................................... 24,500 500 25,000 2– Solutions Manual, Vol.1, Chapter 2 31 Exercise 2–17 (concluded) (3) $6,000 cash paid for insurance less $2,000 ending balance in prepaid insurance. Insurance expense (to balance) ............................... Prepaid insurance (increase in account) .................. Cash ..................................................................... 4,000 2,000 6,000 (4) $20,000 cash paid for miscellaneous expenses plus increase in accrued liabilities. Miscellaneous expense (to balance) ....................... Accrued liabilities (increase in account).............. Cash ..................................................................... 21,000 1,000 20,000 (5) $100,000 x 6% x 3/12 = $1,500 Interest expense ...................................................... Interest payable .................................................... 2–32 1,500 1,500