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Conor Company provided the following data for the current year:             Sales                                                   P 10,000,000             Cost of goods sold                                    5,300,000             Operating expenses                                 3,800,000                                                                                     December 31                          January 1             Prepaid operating expenses                            P 1,000,000                            P 700,000             Accounts payable                                                1,350,000                           1,200,000             Inventory                                                              2,500,000                           2,100,000             Accounts receivable                                            1,400,000                           1,375,000 What amount should be reported as purchases under the cash basis of accounting?

Conor Company provided the following data for the current year:             Sales                                                   P 10,000,000             Cost of goods sold                                    5,300,000             Operating expenses                                 3,800,000                                                                                     December 31                          January 1             Prepaid operating expenses                            P 1,000,000                            P 700,000             Accounts payable                                                1,350,000                           1,200,000             Inventory                                                              2,500,000                           2,100,000             Accounts receivable                                            1,400,000                           1,375,000 What amount should be reported as purchases under the cash basis of accounting?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Conor Company provided the following data for the current year:

            Sales                                                   P 10,000,000

            Cost of goods sold                                    5,300,000

            Operating expenses                                 3,800,000

                                                                                    December 31                          January 1

            Prepaid operating expenses                            P 1,000,000                            P 700,000

            Accounts payable                                                1,350,000                           1,200,000

            Inventory                                                              2,500,000                           2,100,000

            Accounts receivable                                            1,400,000                           1,375,000

What amount should be reported as purchases under the cash basis of accounting?

To achieve the conversion from cash basis to accrual basis of accounting, the following formulas may help. Computations of Sales Cash sales Sales on accounts Trade accounts and notes receivables, end Collection of trade accounts and notes receivable Sales returns, discounts, and allowances Accounts and notes receivable written off Trade notes receivable discounted (NR directly credited) Total Less: Trade acoounts and notes receivable, beginning Total sales - accrual basis Thus, the approach is to add back all items that decreased trade receivables to the ending balance of accounts receivable and notes receivable. The items that decreased receivables normally include: > Collections from customers > Sales returms, allowances and discounts > Accounts and notes receivable written off > Notes receivable discounted - when the notes receivable account is credited upon discounting.
Transcribed Image Text:To achieve the conversion from cash basis to accrual basis of accounting, the following formulas may help. Computations of Sales Cash sales Sales on accounts Trade accounts and notes receivables, end Collection of trade accounts and notes receivable Sales returns, discounts, and allowances Accounts and notes receivable written off Trade notes receivable discounted (NR directly credited) Total Less: Trade acoounts and notes receivable, beginning Total sales - accrual basis Thus, the approach is to add back all items that decreased trade receivables to the ending balance of accounts receivable and notes receivable. The items that decreased receivables normally include: > Collections from customers > Sales returms, allowances and discounts > Accounts and notes receivable written off > Notes receivable discounted - when the notes receivable account is credited upon discounting.
Computations of Purchases Cash purchases Purchases on account Trade accounts and notes payable, end Payment of trade accounts and notes payable Purchases returns, discounts, and allowances Total Less: Trade accounts and notes payable, beginning Total purchases - accrual basis Thus, the approach is to add back all items that decreased trade payables to the ending balance of accounts payable and notes payable. The items that decreased trade payables normally include: > > Payment of trade notes payable > Purchase returns > Purchase allowances > Purchase discounts Payment of accounts payable 通 刘
Transcribed Image Text:Computations of Purchases Cash purchases Purchases on account Trade accounts and notes payable, end Payment of trade accounts and notes payable Purchases returns, discounts, and allowances Total Less: Trade accounts and notes payable, beginning Total purchases - accrual basis Thus, the approach is to add back all items that decreased trade payables to the ending balance of accounts payable and notes payable. The items that decreased trade payables normally include: > > Payment of trade notes payable > Purchase returns > Purchase allowances > Purchase discounts Payment of accounts payable 通 刘
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