Question

Zena Company’s financial records showed the following selected items for 2015:

Advertising receipts                                   $300,000                   Land rental revenues                                 $950,000

Interest paid on borrowings                      $  31,000                   Wage expense                                             $400,000

Zena follows the accrual basis of accounting.  The following balances were taken from Zena’s balance sheets:

                                                                                         12-31-15                   12-31-14

Advertising receivables                                               28,000                         31,000

Prepaid advertising costs                                            40,000                         32,000

Wages payable                                                              30,000                         45,000

Interest payable                                                            62,000                         50,000

Unearned land rental revenue                                                      45,000                         22,000

1. What were advertising-related revenues for 2015?

300,000-3,000 (28k-31k) = 297,000

2. What was interest expense for 2015?

31,000+12,000 (62k-50k) = 43,000

3. How much cash was paid out for wages and salaries during 2015?

400,000+15,000 (30k-45k) = 415,000

4. How much cash was collected for land rentals during 2015?

950,000+23,000 (45k-22k) =973,000

Answer 1

1. Zena Company’s financial records showed the following selected items for 2015:

Advertising receipts                    $300,000 Land rental revenues                                 $950,000

Interest paid on borrowings        $  31,000 Wage expense                                             $400,000

Zena follows the accrual basis of accounting.  The following balances were taken from Zena’s balance sheets:

                                                                                         12-31-15                   12-31-14

Advertising receivables                                               28,000                         31,000

Prepaid advertising costs                                            40,000                         32,000

Wages payable                                                              30,000                         45,000

Interest payable                                                            62,000                         50,000

Unearned land rental revenue                                       45,000                         22,000

sol:

1) What were advertising-related revenues for 2015?

a) As the receivables has reduced by $3000 from 2014 to 2015($28,000-$31,000).

The advertising-related revenues for 2015 is $300,000 - $3,000= $297,000

2)What was interest expense for 2015?

a)Interest expense during 2015 =Interest paid on borrowings + interest payable

interest expense for 2015 =$31,000+$12,000($62000-$50000)=$43,000

3)How much cash was paid out for wages and salaries during 2015?

a)Cash paid for wages and salary during 2015 = Wage expense  + wages paid($30,000- $45,000)

Cash paid out for Wages and salary during 2015 =$400, 000 + $15,000=$415,000

4)How much cash was collected for land rentals during 2015?

a)Land rentals during 2015 = Land rental revenues + unearned land rent revenue

unearned land rent =$45,000-$22,000=$23,000

Cash collected for land rentals during 2015 =$950,000+$23,000=$973,000