In: Accounting
Bob Fuji began business on January 1, 2018 with a Balance Sheet that listed $ 300,000 of Cash and $ 300,000 of Shareholders' Equity. During 2018, the following inventory related transactions took place:
Produced 15,000 units of inventory @ a cost of $ 20 per unit
Delivered 12,000 units of inventory to customers with a selling price of $ 28 per unit
Collected $ 280,000 of cash related to 10,000 units of inventory
The above transactions were the only transactions for the firm, and the "year-end" selling price of inventory is $ 28.
D. (3) If Bob Fuji recognizes revenue at the Completion of Production, Total Assets on
Bob Fuji's December 31, 2018 Balance Sheet will be equal to $ _____________
E. (4) If Bob Fuji recognizes revenue at the Time of Cash Collection, Total Assets on
Bob Fuji's December 31, 2018 Balance Sheet will be equal to $ _____________
F. (3) _____ Assume that (other than collecting the amount of money that he was
owed at the end of 2018) in 2019, the only activity of Bob Fuji is that he
"liquidates" any remaining inventory, receiving cash in the amount of
$ 25 per unit.
G. If Bob recognizes revenue at "Time of Cash Collection", which of the following items will be GREATER than $ 0 on Bob Fuji's 2019 Income Statement?
A. Revenue
B. Net Income
C. Both A and B
D. None of the above
(D(3) | |||||
Balance Sheet as on December 31, 2018 | |||||
$ | |||||
Assets | |||||
Cash | 2,80,000 | 300000-300000+280000 | |||
Inventory | 60,000 | (15000*20)-(12000*20) | |||
Accounts Receivable | 56,000 | (12000*28)-280000 | |||
Total | 3,96,000 | ||||
Equity & Liabilities | |||||
Shareholder's Equity | 3,00,000 | ||||
Retained Earning | 96,000 | 12000*(28-20) | |||
Total | 3,96,000 | ||||
(D(4) | |||||
Balance Sheet as on December 31, 2018 | |||||
$ | |||||
Assets | |||||
Cash | 2,80,000 | 300000-300000+280000 | |||
Inventory | 1,00,000 | (15000*20)-(10000*20) | |||
Accounts Receivable | - | (10000*28)-280000 | |||
Total | 3,80,000 | ||||
Equity & Liabilities | |||||
Shareholder's Equity | 3,00,000 | ||||
Retained Earning | 80,000 | (10000*28)-(10000*20) | |||
Total | 3,80,000 | ||||
(G) If recognise income at the time of cash collection then revenue will be $ 2,80,000 and net income | |||||
will be $ 80,000. So option C is correct as both will be greater than zero. | |||||