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Unformatted text preview: an Account payable balance of $12000. The company owed this debt at that point in time. The owners of the office premises requested the company pat rent in advance. A check was issued for 6000. This amount was deducted from the cash account leaving a balance of $36,000 in cash as reflected on the balance sheet and is recorded as prepaid rent increasing the companys assets, bringing the assets to $92,000 The company is interested in expanding and will be seeking a bank loan. Although you have firm orders of $100,000 worth of cookies, this transaction cannot be reflected on your balance sheet unless the customers have paid for the product in advance. Even then, the revenue must be allocated to the fiscal periods in which the cookies are actually delivered. The company is in a strong position even though you have been in the business for 2 months. In comparing December statements, owners equity and assets have increased by 9% leaving a net income of $10,375....
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