Question

home / study / business / accounting / accounting questions and answers / zambrano wholesale corporation maintains its records on a cash basis. at the end of each year ... Your question needs more information to be answered. Review expert comments below. Then, edit your question. Question: Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the... Edit question Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the company’s accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred during the year ended December 31, 2018: Cash receipts: From customers $ 715,000 Interest on note 4,060 Loan from a local bank 85,000 Total cash receipts $ 804,060 Cash disbursements: Purchase of merchandise $ 398,000 Annual insurance payment 6,960 Payment of salaries and wages 218,000 Dividends paid to shareholders 12,000 Annual rent payment 28,000 Total cash disbursements $ 662,960 Selected balance sheet information: 12/31/17 12/31/18 Cash $ 29,000 $ 170,100 Accounts receivable 66,000 100,000 Inventory 88,000 66,000 Prepaid insurance 3,300 ? Prepaid rent 11,800 ? Interest receivable 3,045 ? Note receivable 58,000 58,000 Equipment 140,000 140,000 Accumulated depreciation—equipment (44,000 ) (58,000 ) Accounts payable (for merchandise) 114,000 130,000 Salaries and wages payable 20,800 25,600 Notes payable 0 85,000 Interest payable 0 ? Additional information: On March 31, 2017, Zambrano lent a customer $58,000. Interest at 7% is payable annually on each March 31. Principal is due in 2021. The annual insurance payment is paid in advance on April 30. The policy period begins on May 1. On October 31, 2018, Zambrano borrowed $85,000 from a local bank. Principal and interest at 6% are due on October 31, 2019. Annual rent on the company’s facilities is paid in advance on June 30. The rental period begins on July 1. Required: 1. Prepare an accrual basis income statement for 2018 (ignore income taxes). (Other expenses should be indicated with a minus sign.) 2. Determine the following balance sheet amounts on December 31, 2018

Answer 1

Cash Book
Balance beginning		29000
Add: Collections
Fees customers	715000
Interest on note	4060
Loan from local bank	85000
Total receipts		804060
		833060
Less: Payments
Purchase of merchandise	398000
Annual Insurance	6960
Salaries and wages	218000
Dividends to shareholders	12000
Annual rent payment	28000
Total cash payments		662960
Balance ending		170100
Accounts receivable
Balance ending		100000
Add: Collections		715000
		815000
Less: Balance beginning		66000
Sales for the year		749000
Accounts payable
Balance ending		130000
Add: Payments made		398000
		528000
Less: Balance beginning		114000
Purchases for the year		414000
Inventory
Balance beginning		88000
Add: Purchases		414000
		502000
Less: Ending Inventory		66000
Cost of goods sold		436000
Interest revenue
Interest received in cash		4060
Less: receivable on March 31, 2017		3045
received for current year		1015
Interest due on note receivable (9 months)		3045
Interest revenue for current year		4060
Insurance expense
Annual insurance paid		6960
Less: prepaid for next year (4 months)		2320
use for current year (8 months)		4640
Add: prepaid on March 31, 2017		3300
Insurance expense for the year		7940
Interest expense
Interest due for 2 months		850
Rent expense
Annual rent paid		28000
Prepaid for next year		14000
Paid for current year		14000
Add: prepaid on Dec. 31, 2017		11800
Rent expense for the year		25800
Salary and wages expense
Cash paid for salaries		218000
Less: Payable on 12/31/17		20800
Paid for current year		197200
Add: Payable on 12/31/18		25600
Salary expense for current year		222800
Income Statement
For the year December 31, 2018
Sales revenue		749000
Less: Cost of goods sold		436000
Gross Profit		313000
Less: operating expense
Insurance expense	7940
Depreciation expense	14000
Rent expense	25800
Salaries & wages	222800
Total operating expenses		270540
Operating Income		42460
Othere income / expenses
Interest revenue	4060
Interest expnses	-850	3210
Net Income		45670