Concept explainers
1.
Calculate cash paid to suppliers.
1.
Explanation of Solution
Cash outflows: The amount of cash paid by a company for the operating, investing, and financing activities of the business during a certain period is referred to as
Calculate cash paid to suppliers.
Situation | Cost of goods sold | Inventory Increase (Decrease) | Accounts payable Increase (Decrease) | Cash paid to suppliers |
1 | $150 | $25 | $20 | (1) $155 |
2 | $150 | ($25) | $20 | (2) $105 |
3 | $150 | $25 | ($20) | (3) $195 |
4 | $150 | ($25) | ($20) | (4) $145 |
Table (1)
Working note:
Calculate amount of cash paid to suppliers for each situation:
Situation 1:
Situation 2:
Situation 3:
Situation 4:
2.
Prepare the summary
2.
Explanation of Solution
Prepare the summary journal entry for each situation.
Situation 1:
Date | Accounts title and explanation | Debit ($) | Credit ($) |
Cost of goods sold | 150 | ||
Inventory | 25 | ||
Accounts payable | 20 | ||
Cash | 155 | ||
(To record the summary journal entry) |
Table (1)
- Cost of goods sold is an expense account and it decreases the
stockholders’ equity. Hence, debit cost of goods sold with $150. - Inventory is an asset account and it is increased. Hence, debit inventory with $25.
- Accounts payable is a liability account and it is increased. Hence, credit accounts payable with $20.
- Cash is an asset account and it is decreased. Therefore, credit cash with $155.
Situation 2:
Date | Accounts title and explanation | Debit ($) | Credit ($) |
Cost of goods sold | 150 | ||
Inventory | 25 | ||
Accounts payable | 20 | ||
Cash | 105 | ||
(To record the summary journal entry) |
Table (2)
- Cost of goods sold is an expense account and it decreases the stockholders’ equity. Hence, debit cost of goods sold with $150.
- Inventory is an asset account and it is decreased. Hence, credit inventory with $25.
- Accounts payable is a liability account and it is decreased. Hence, credit accounts payable with $20.
- Cash is an asset account and it is decreased. Therefore, credit cash with $105.
Situation 3:
Date | Accounts title and explanation | Debit ($) | Credit ($) |
Cost of goods sold | 150 | ||
Accounts payable | 20 | ||
Inventory | 25 | ||
Cash | 195 | ||
(To record the summary journal entry) |
Table (3)
- Cost of goods sold is an expense account and it decreases the stockholders’ equity. Hence, debit cost of goods sold with $150.
- Inventory is an asset account and it is increased. Hence, debit inventory with $25.
- Accounts payable is a liability account and it is decreased. Hence, debit accounts payable with $20.
- Cash is an asset account and it is decreased. Therefore, credit cash with $195.
Situation 4:
Date | Accounts title and explanation | Debit ($) | Credit ($) |
Cost of goods sold | 150 | ||
Accounts payable | 20 | ||
Inventory | 25 | ||
Cash | 145 | ||
(To record the summary journal entry) |
Table (4)
- Cost of goods sold is an expense account and it decreases the stockholders’ equity. Hence, debit cost of goods sold with $150.
- Accounts payable is a liability account and it is decreased. Hence, debit accounts payable with $20.
- Inventory is an asset account and it is decreased. Hence, credit inventory with $25.
- Cash is an asset account and it is decreased. Therefore, credit cash with $145.
Want to see more full solutions like this?
Chapter 11 Solutions
Financial Accounting
- What was Glacial Enterprises asset turnover ratio on these general accounting question?arrow_forwardI don't quite understand APIC pushdown accounting. I know you subtract: "Fair Value - Book Value = Net Adjustment to APIC" of assets, but the amount I added up is too much, and now both sides are unequal. What do I do? Please clearly explain, in detail. Thank you. :)arrow_forwardNeed help with this general accounting questionarrow_forward
- What is the gearing ratio on these financial accounting question?arrow_forwardCost Pools Budgeted Costs Cost Driver Practical Capacity Budgeted Activity for S-101 Budgeted Activity for C-110 Setup activity 250000 Setup hours 5000 2500 2350 Packing and shipping 50000 Number of shipments 2000 1200 775 Inspection 30000 Number of batches 1000 250 700 Machining 750000 Units produced 150000 100000 40000 Purchase ordering 40000 Number of orders 300 50 110 1. Which Cost Pool is approximately 22 percent of the total budgeted costs? 2. What percentage of the total budgeted costs does Machining take up? 3. What is the percentage of the total budgeted costs taken up by the smallest Cost Pool? 4. Which Cost Pool has 1.25 percent slack? 5. Which Cost Pool has the highest percent slack? 6. In the Inspection Cost Pool, what is the amount of difference between budgeted costs and the budgeted activity for both products? 7. In how many cost pools is the S-101 manufacturing overhead (MO) greater than the C-110 manufacturing overhead (MO)? 8. In which Cost Pools is…arrow_forwardFinancial statements for Askew Industries for 2024 are shown below (in thousands): 2024 Income Statement Net sales $ 8,600 Cost of goods sold (6,050) Gross profit 2,550 Operating expenses (1,850) Interest expense (100) Income tax expense (240) Net income $ 360 Comparative Balance Sheets December 31 2024 2023 Assets Cash $ 500 $ 400 Accounts receivable 500 300 Inventory 700 500 Property, plant, and equipment (net) 1,000 1,100 $ 2,700 $ 2,300 Liabilities and Shareholders’ Equity Current liabilities $ 500 $ 250 Bonds payable 900 900 Common stock 500 500 Retained earnings 800 650 $ 2,700 $ 2,300 Calculate the following ratios for 2024. Note: Consider 365 days a year. Round your intermediate calculations and final answers to 2 decimal places.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education