Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of 2021, her accountant computes her accrual basis income that is used on her tax return. For 2021, Selma had cash receipts of $1,400,000, which included $200,000 collected on accounts receivable from 2020 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2021, she had $250,000 in accounts receivable from customers, all from 2021 sales. a. Compute Selma's accrual basis gross revenues for 2021. b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2021 was $1,300,000. At the end of 2020, she had merchandise on hand with a cost of $150,000. At the end of 2021, the cost of merchandise on hand was $300,000. Compute Selma's gross income (profit) from merchandise sales for 2021. The cost of goods sold for 2021 under the accrual method is $ Therefore, the gross profit from merchandise sales for 2021 under the accrual basis is $
Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of 2021, her accountant computes her accrual basis income that is used on her tax return. For 2021, Selma had cash receipts of $1,400,000, which included $200,000 collected on accounts receivable from 2020 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2021, she had $250,000 in accounts receivable from customers, all from 2021 sales. a. Compute Selma's accrual basis gross revenues for 2021. b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2021 was $1,300,000. At the end of 2020, she had merchandise on hand with a cost of $150,000. At the end of 2021, the cost of merchandise on hand was $300,000. Compute Selma's gross income (profit) from merchandise sales for 2021. The cost of goods sold for 2021 under the accrual method is $ Therefore, the gross profit from merchandise sales for 2021 under the accrual basis is $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 4-32 (LO. 2)
Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of 2021, her accountant
computes her accrual basis income that is used on her tax return. For 2021, Selma had cash receipts of $1,400,000, which included
$200,000 collected on accounts receivable from 2020 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2021,
she had $250,000 in accounts receivable from customers, all from 2021 sales.
a. Compute Selma's accrual basis gross revenues for 2021.
$4
b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2021 was $1,300,000. At the end of 2020, she had
merchandise on hand with a cost of $150,000. At the end of 2021, the cost of merchandise on hand was $300,000.
Compute Selma's gross income (profit) from merchandise sales for 2021.
The cost of goods sold for 2021 under the accrual method is $
Therefore, the gross profit from merchandise sales for
2021 under the accrual basis is $
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