1. Based on the following transactions, calculate the revenues, expenses, and net income that would be...

1. Based on the following transactions, calculate the revenues, expenses, and net income that would be reported on (a) the cash basis and (b) the accrual basis:

i. Inventory costing $70,000 was purchased on account.
ii. Inventory costing $60,000 was sold for $100,000. Eighty percent of the sales were for cash.
iii. Cash collected from credit customers (those who bought on account) totalled $20,000.
iv. A lease was signed at the beginning of the year, requiring monthly payments of $1,000. The rent for the first month was paid when the lease was signed. After that, the $1,000 rent was paid on the last day of each month, to cover the following month.
v. Supplies costing $5,500 were purchased for cash. At the end of the year, $500 of the supplies were still unused.
vi. Wages of $37,500 were paid during the year. Also, wages of $500 remained unpaid at year end

2. Consider this and prepare journal entries for a) and b) for the year of 2020.

December 31, 2019

Equipment

330,000

a. Paid $102,000 for wages during the year. At year end, the company owed another $2,000 to the employees for the last week of work in December.
- Looks like [DR Wages Expense 102,000 CR Cash 102,000 & DR Wages Expense 2,000 CR Wages Payable 2,000] is incorrect.
- Why are amounts like 8,000, 96,000, or 94,000 appearing for this transaction?
b. Depreciated the equipment for the year. The company had bought its equipment at the beginning of 2017, and it was expected to last 10 years and have a residual value of $30,000.
- Should I use 8 years left or 7 years left if the equipment was bought at the beginning of 2017?

Thank you kindly! Will give a thumbs up if the answer is correct and elaborate :)

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Expert Solution

ekkarill92 answered 1 year ago

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