In its first year of operations, Cullumber Company recognized $23,520 in service revenue, $5,040 of which was on account and stilloutstanding at year-end. The remaining $18,480 was received in cash from customers.The company incurred operating expenses of $13,272. Of these expenses, $10,080 were paid in cash; $3,192 was still owed onaccount at year-end. In addition, Cullumber prepaid $2,016 for insurance coverage that would not be used until the second year ofoperations.(a) Calculate the first year's net earnings under the cash basis of accounting, and calculate the first year's net earnings under theaccrual basis of accounting.Cash BasisNet earnings$+AAccrual Basis(b) Which basis of accounting (cash or accrual) provides more useful information for decision-makers?eTextbook and Media

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Answered: In its first year of operations,…

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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Giga Inc has the following information: Unearned service revenue=$16,680 Sales tax payable=$8,490 Accounts payable=54,470 1.In the month of January dated 05, the company sold merchandise of cash amounting to $16,200, which includes 8% sales tax amount. 2.Jan-12-Services to customers who made advance payment of 11,490 3.Jan-14-Payment paid to state revenue department for sales tax collected in december 2014 (8,490) 4.Jan-20-Company sold 800 units of a new product on credit at 50 per unit, plus 8% sales tax 5.Jan-21-Borrowed 27,000 from Emerald Bank on 3-month, 8%, 27,000 note. 6.Jan-25-Company sold merchandise for cash totaling 10,098 which includes 8% sales tax. Required: January transactions-Journal entries
Clariza Frozen Goods Inc. opened its business on January 1, 2020. The Company has the followingtransactions during the year:• Sales (cash and credit) during the year amounted P5,000,000. Ninety percent of these were madeon credit.• The Company granted discounts to its customers as follows:o 3/10, n/30o 2/15, n/30o 1% for all cash customers• Cash received from customers (deposited with Jennifer Bank) amounting to P3,425,000 consistedof:✓ Cash customers P495,000✓ Customers paying within 10 days 1,940,000✓ Customers paying within 15 days 490,000✓ Customers not availing the discounts 500,000• Merchandise returns amounted to P500,000, all related to credit sales.• The Company provided for 2% of its net credit sales as doubtful accounts.Unadjusted balances of some of the Company’s accounts as at December 31, 2020 before closing its booksare as follows:Cash in bank per ledger - Charles Bank P1,500,000Cash in bank per bank statement - Charles Bank 1,775,000Current account - Jennifer Bank…
Flint Corporation shipped $20,400 of merchandise on consignment to Gooch Company. Flint paid freight costs of $2,000. Gooch Company paid $480 for local advertising, which is reimbursable from Flint. By year-end, 62% of the merchandise had been sold for $21,500. Gooch notified Flint, retained a 10% commission, and remitted the cash due to Flint. Prepare Flint's journal entry when the cash is received. (Round answers to 0 decimal places, e.g. 1,525. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation (To record the cash remitted to Flint.) (To record the cost of inventory sold on consignment.) Debit Ill Credit
The following transactions apply to Ozark Sales for Year 1: The business was started when the company received $48,000 from the issue of common stock. Purchased merchandise inventory of $176,000 on account. Sold merchandise for $202,000 cash (not including sales tax). Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $127,000. Provided a six-month warranty on the merchandise sold. Based on industry estimates, the warranty claims would amount to 4 percent of sales. Paid the sales tax to the state agency on $152,000 of the sales. On September 1, Year 1, borrowed $21,500 from the local bank. The note had a 5 percent interest rate and matured on March 1, Year 2. Paid $6,000 for warranty repairs during the year. Paid operating expenses of $55,500 for the year. Paid $124,300 of accounts payable. Recorded accrued interest on the note issued in transaction number 6. b1. Prepare the journal entries for the preceding transactions.b2. Post…
York Company engaged in the following transactions for Year 1. The beginning cash balance was $86,000 and the ending cash balance was $59,100. 1. Sales on account were $548,000. The beginning receivables balance was $128,000 and the ending balance was $90,000. 2. Salaries expense for the period was $232,000. The beginning salaries payable balance was $16,000 and the ending balance was $8,000. 3. Other operating expenses for the period were $236,000. The beginning other operating expenses payable balance was $16,000 and the ending balance was $10,000. 4. Recorded $30,000 of depreciation expense. The beginning and ending balances in the Accumulated Depreciation account were $12,000 and $42,000, respectively. 5. The Equipment account had beginning and ending balances of $44,000 and $56,000, respectively. There were no sales of equipment during the period. 6. The beginning and ending balances in the Notes Payable account were $36,000 and $44,000, respectively. There were no payoffs of…
Statsen Company, which prepares financial reports at the end of the calendar year, established a branch on July 1, 2020. The following transactions occurred during the formation of the branch and its first six months of operations, ending December 31, 2020. 1. The Home Office sent $35,000 cash to the branch to begin operations. 2. The Home Office shipped inventory to the branch. Intercompany billings totaled $75,000, which was the Home Office's cost. 3. The branch acquired merchandise display equipment which cost $15,000 on July 1, 2020. (Assume that branch fixed assets are carried on the home office books). 4. The branch purchased inventory costing $53,750 from outside vendors on account. 5. The branch had credit sales of $106,250 and cash sales of $43,750. Requirements: 1. Prepare journal entries in the books of the home office and in the books of the branch office for the above transaction
Clariza Frozen Goods Inc. opened its business on January 1, 2020. The Company has the followingtransactions during the year:• Sales (cash and credit) during the year amounted P5,000,000. Ninety percent of these were madeon credit.• The Company granted discounts to its customers as follows:o 3/10, n/30o 2/15, n/30o 1% for all cash customers• Cash received from customers (deposited with Jennifer Bank) amounting to P3,425,000 consistedof:✓ Cash customers P495,000✓ Customers paying within 10 days 1,940,000✓ Customers paying within 15 days 490,000✓ Customers not availing the discounts 500,000• Merchandise returns amounted to P500,000, all related to credit sales.• The Company provided for 2% of its net credit sales as doubtful accounts.Unadjusted balances of some of the Company’s accounts as at December 31, 2020 before closing its booksare as follows:Cash in bank per ledger - Charles Bank P1,500,000Cash in bank per bank statement - Charles Bank 1,775,000Current account - Jennifer Bank…
The following transactions were completed by Emmanuel Company during the current fiscal year ended December 31: Jan. 29 Received 40% of the $17,000 balance owed by Jankovich Co., a bankrupt business, and wrote off the remainder as uncollectible. Apr. 18 Reinstated the account of Vince Karm, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,560 cash in full payment of Karm’s account. Aug. 9 Wrote off the $22,380 balance owed by Golden Stallion Co., which has no assets. Nov. 7 Reinstated the account of Wiley Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $13,220 cash in full payment of the account. Dec. 31 Wrote off the following accounts as uncollectible (one entry): Claire Moon Inc., $22,860; Jet Set Co., $15,320; Randall Distributors, $41,460; Harmonic Audio, $18,890. 31 Based on an analysis of the $2,740,000 of accounts receivable, it was estimated that $113,330 will…
The following transactions apply to Walnut Enterprises for Year 1, its first year of operations: Received $50,000 cash from the issue of a short-term note with a 6 percent interest rate and a one-year maturity. The note was made on April 1, Year 1. Received $130,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent. Paid $62,000 cash for other operating expenses during the year. Paid the sales tax due on $110,000 of the service revenue for the year. Sales tax on the balance of the revenue is not due until Year 2. Recognized the accrued interest at December 31, Year 1. The following transactions apply to Walnut Enterprises for Year 2: Paid the balance of the sales tax due for Year 1. Received $201,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent. Repaid the principal of the note and applicable interest on April 1, Year 2. Paid $102,500 of other…

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