Determining Expected Revenues and Expenses and Preparing an Income Statement
Beth’s Espresso Cart Inc. sells coffee, pastries, and mineral water at the Boulder Mall. Last year, Beth leased a coffee cart and opened her business. She initially felt that cash flows were a useful measure of her performance. The cart’s owner is now running a competitive coffee cart on the next block. Beth has heard about accrual accounting and is hoping to develop a better measure of her performance this year.
1. Beth paid $5,200 for a coffee cart, which she expects to use for the next four years.
2. She purchased coffee pots, cups, and other supplies at a cost of $2,000 and paid cash. Half of these supplies will be replaced each year.
3. Electricity and propane costs averaged $40 per on the.
4. Beth started and ended the year with negligible amounts of coffee beans and mineral water.
5. Each month, Beth was paid a salary of $500 to cover personal living expenses.