Question

Henry Hawkins uses an accrual-based accounting system. That means they report sales revenues on the income statement in the period the revenues are earned and they report expenses on the income statement in the period the expenses were incurred to earn the revenue.

Based on the following information, calculate the cash received from customers for 2016.

Sales for 2016 (all on account) $1,545,000

Accounts receivable, January 1, 2016 $81,600

Accounts receivable, December 31, 2016 $100,800

Cash received from customers in 2016

Assume that the only thing happening in Accounts Payable is the purchase and payment of inventory. Based on the following information, calculate the cash paid for inventory for 2016:

Cost of goods sold $525,000

Inventory, January 1, 2016 $158,600

Accounts payable, January 1, 2016 $66,700

Inventory, December 31, 2016 $130,400

Accounts payable, December 31, 2016 $82,000

Cash paid for inventory in 2016

Answer 1

• All working forms part of the answer
• Requirement #1: Cash received from customer in 2016

Accounts receivables – 1 jan 2016	$          81,600
Net Sales 2016	$    1,545,000
Accounts receivables – 31 Dec 2016	$     (100,800)
Cash receipts from customers	$    1,525,800 = ANSWER

• Requirement #2: Cash paid for Inventory

Inventory – 31 Dec 2016	$   130,400
Cost of Goods Sold 2016	$   525,000
Inventory – 1 Jan 2016	$ (158,600)
Inventory purchased during 2016	$   496,800

Accounts Payable – 1 Jan 2016	$      66,700
Inventory purchased 2016	$   496,800
Accounts Payable – 31 Dec 2016	$   (82,000)
Cash paid for Inventory in 2016	$   481,500 = ANSWER