.Kim Havens is a friend of yours from high school. She decided to become a beautician after leaving high school. She recently opened her own shop, and has contracted her services to a local hospital. She is paid a monthly fee for her services, and receives a small gratuity from each of the patients.

She has just received her first set of financial statements from her accountant. She is quite upset. The statements show a cash balance of $3,600 at the end of the month, but a net income of only $500. She has written you a letter, asking you whether such a situation is possible, or whether she should find another accountant.

Required: Write a short letter to your friend. Use proper form. Answer her question completely, but briefly.

2.A new sales representative, Mark Yount, has just received his copy of the month-end financial reports. He is puzzled by the term "unearned revenue." He left the following e-mail message for you on the company’s bulletin board system:

What is this? Creative Accounting, or what? Line item 12 on year-to-date financials shows over $25Gs ($25,000) in Unearned Revenue! Come on, guys! Either we earned it, or we didn’t . . . Right? Is this how you guys lower our commissions?

Required: Write a response to send to Mark.

3.Journalizing and posting closing entries is a required step in the accounting cycle. Discuss why it is necessary to close the books at the end of an accounting period. If closing entries were not made, how would the preparation of financial statements be affected?