Question

In: Accounting

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

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. The company declared dividends of $7,000 on December 15, 2020, to be paid on January 15, 2021. Does this transaction affect Cash in 2020? How should it be recorded?

Solutions

Expert Solution

Sol :

Computation of Net Income as per Accrual Basis

Particulars Amount Particulars Amount

Inventory Purchased 70000 Cash Sales     80,000

Lease Rentals    12,000     Credit sales 20,000

Supplies purchased 5500 Closing Inventory(70000-60000) 10,000

Wages Expense 38000 Closing supplies 500

Net Loss    15,000

Total 125500 125500

Computation of Net Income as per Accrual Basis

Particulars Amount    Particulars Amount

Inventory Purchased 70000 Cash Sales 80,000

Lease Rentals    11,000    Cash Collected on sales   20,000

Supplies purchased 5500 Closing Inventory(70000-60000) 10000

Wages Expense 37500 Closing supplies    500

Net Loss 13500

Total 124000 124000

Revenue on cash Basis & Accrual Basis

Cash Basis Accrual Basis

Total Sales of 100,000 of which 80% are cash sales 80000 100,000

Expenditure on Cash Baiss & Accrual Basis

Lease Rentals paid on following month (1000*11) 11000 12000

Wages paid 37500 unpaid 500 37500 38000

2.

Journal entry at the time of declaration of dividends

Dec 15,2020 Retained earnings Dr    7000

Dividend Payable    7000

Journal entry at the time of payment of dividends:

Jan 15,2021 Dividend Payable Dr    7000

Cash 7000

Dividend payable on closing does not affect cash balance as on closing date.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Based on the following transactions, calculate the revenues, expenses, and net income that would be reported...
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. 80% 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...
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....
What is the correct presentation of the income statement? Revenues - expenses = Net income -...
What is the correct presentation of the income statement? Revenues - expenses = Net income - losses + gains Revenues - expenses + gains - losses = Net Income Revenues + gains - losses - expenses = Net Income Revenues - losses - expenses + gains = Net Income Which statement about negative goodwill is true? Negative goodwill should be recorded as a direct credit to retained earnings. Negative goodwill is not recorded. Negative goodwill should be allocated proportionately to...
3/ revenues and expenses, how and where they are reported ?
3/ revenues and expenses, how and where they are reported ?
1. Would a person with the following income and expenses qualify for a home based on...
1. Would a person with the following income and expenses qualify for a home based on the front end affordability ratio? Annual gross income = $60,000 Monthly principal and interest payment = $1,000 Monthly home insurance payment = $100 Monthly property tax payment = $100 Monthly credit card payment = $50 Monthly car payment = $250 Monthly student loan payment = $200 You would like to have a 10% down payment for a house valued at $100,000 in 3 years....
1) Net income: A) is calculated by subtracting total expenses and total dividends from total revenues....
1) Net income: A) is calculated by subtracting total expenses and total dividends from total revenues. B) occurs when total revenues are less than total expenses. C) is often referred to as the "bottom line" on an income statement. D) decreases total stockholders' equity. 2) On January 1, 2017, total assets for Wininger Technologies were $140,000; on December 31, 2017, total assets were $155,000. On January 1, 2017, total liabilities were $111,000; on December 31, 2017, total liabilities were $118,000....
Pepper Company reported revenues of $12,000, supplies expense of $3,000, and net income of $2,000 for...
Pepper Company reported revenues of $12,000, supplies expense of $3,000, and net income of $2,000 for the most recent period. If the company’s only other expense was Rent Expense, what was its balance at the end of the period? Multiple Choice $7,000 $9,000 $14,000 $15,000
1. If net revenues are 100,000 and advertising expenses are 20,000 what percentage would you get...
1. If net revenues are 100,000 and advertising expenses are 20,000 what percentage would you get for advertising if you were doing a vertical analysis? 2. If prior year cash was 100,000 and current year cash is 150,000 what would be the horizontal analysis calculation? 3. In the world of merchandising what is the equation to calculate cost of goods sold? 4. What makes up net purchases? 5. In manufacturing what are the differences in calculating cost of goods sold...
Laser World's income statement reported total revenues of $910,000 and total expenses (including $43,500 depreciation) of...
Laser World's income statement reported total revenues of $910,000 and total expenses (including $43,500 depreciation) of $750,000. The balance sheet reported the following: Accounts Receivable—beginning balance, $60,000 and ending balance, $61,500; Accounts Payable—beginning balance, $26,500 and ending balance, $32,500. Therefore, based only on this information, the net cash flows from operating activities were: rev: 05_01_2020_QC_CS-210424 Multiple Choice $112,300. $164,500. $208,000. $199,150.
The beginning balance of retained earnings plus net income (revenues less expenses), less dividends results in...
The beginning balance of retained earnings plus net income (revenues less expenses), less dividends results in the ending balance of retained earnings. At September 1, 2014, Five-O Inc. reported retained earnings of $136,000. During the month, Five-O generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at September 30, 2014? $8,000 credit $137,000 credit $142,000 credit $136,000 debit
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT