Question

In: Accounting

Bob Fuji began business on January 1, 2018 with a Balance Sheet that listed $ 300,000...

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    

Solutions

Expert Solution

(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.

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