In: Accounting
Question 1: On December 31, 2019, Company A had the following account balances:
Cash |
$ 90,000 |
Accumulated Depreciation, Equipment |
$ 90,000 |
Accounts Receivable |
96,000 |
Accounts Payable |
60,000 |
Inventory |
60,000 |
Wages Payable |
8,000 |
Supplies |
2,000 |
Bank Loan Payable |
150,000 |
Long-Term Investment |
80,000 |
Common Shares |
250,000 |
Equipment |
330,000 |
Retained Earnings |
100,000 |
Prepare journal entries to record each of the above transactions and adjustments.
In 2020, the following transactions occurred:
Question 2: 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:
1. Journal Entries:
S.No | Particulars | Debit | Credit |
1 | Wages Expenses | 104,000 | |
Cash | 102,000 | ||
Wages Payable | 2,000 | ||
(To record wages expenses) | |||
2 | Depreciation Expense (330,000-30,000)/10 | 30,000 | |
Accumulated Depreciation | 30,000 | ||
(To record depreciation expense) |
2.
a. Cash Basis:
S.No | Particulars | Debit | Credit |
i. | No Entry | ||
ii. | Cash (100,000*80%) | 80,000 | |
Sales | 80,000 | ||
Cost of Goods Sold (60,000*80%) | 48,000 | ||
Inventory | 48,000 | ||
iii. | Cash (100,000*20%) | 20,000 | |
Sales | 20,000 | ||
Cost of Goods Sold (60,000*20%) | 12,000 | ||
Inventory | 12,000 | ||
iv. | Lease Rent Expense (1,000*13) | 13,000 | |
Cash | 13,000 | ||
v. | Supplies | 5,500 | |
Cash | 5,500 | ||
Supplies Expenses (5,500-500) | 5,000 | ||
Supplies | 5,000 | ||
vi. | Wages Expenses | 37,500 | |
Cash | 37,500 |
Particulars | $ |
Revenue | 100,000 |
Less: Expenses | 115,500 |
Net Income / (Loss) | (15,500) |
(b) Accrual Basis:
S.No | Particulars | Debit | Credit |
i. | Inventory | 70,000 | |
Accounts Payable | 70,000 | ||
ii. | Cash | 80,000 | |
Accounts Receivable | 20,000 | ||
Sales | 100,000 | ||
iii. | Cost of Goods Sold | 60,000 | |
Inventory | 60,000 | ||
iv. | Lease Rent (1,000*12) | 12,000 | |
Prepaid Lease Rent | 1,000 | ||
Cash | 13,000 | ||
v. | Supplies | 5,500 | |
Cash | 5,500 | ||
Supplies Expenses (5,500-500) | 5,000 | ||
Supplies | 5,000 | ||
vi. | Wages Expenses | 38,000 | |
Cash | 37,500 | ||
Wages Payable | 500 |
Particulars | $ |
Revenue | 100,000 |
Less: Expenses | 115,000 |
Net Income / (Loss) | (15,000) |