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home / study / business / accounting / accounting questions and answers / zambrano wholesale corporation maintains its records on a cash basis. at the end of each year ... Your question needs more information to be answered. Review expert comments below. Then, edit your question. Question: Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the... Edit question Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the company’s accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred during the year ended December 31, 2018: Cash receipts: From customers $ 715,000 Interest on note 4,060 Loan from a local bank 85,000 Total cash receipts $ 804,060 Cash disbursements: Purchase of merchandise $ 398,000 Annual insurance payment 6,960 Payment of salaries and wages 218,000 Dividends paid to shareholders 12,000 Annual rent payment 28,000 Total cash disbursements $ 662,960 Selected balance sheet information: 12/31/17 12/31/18 Cash $ 29,000 $ 170,100 Accounts receivable 66,000 100,000 Inventory 88,000 66,000 Prepaid insurance 3,300 ? Prepaid rent 11,800 ? Interest receivable 3,045 ? Note receivable 58,000 58,000 Equipment 140,000 140,000 Accumulated depreciation—equipment (44,000 ) (58,000 ) Accounts payable (for merchandise) 114,000 130,000 Salaries and wages payable 20,800 25,600 Notes payable 0 85,000 Interest payable 0 ? Additional information: On March 31, 2017, Zambrano lent a customer $58,000. Interest at 7% is payable annually on each March 31. Principal is due in 2021. The annual insurance payment is paid in advance on April 30. The policy period begins on May 1. On October 31, 2018, Zambrano borrowed $85,000 from a local bank. Principal and interest at 6% are due on October 31, 2019. Annual rent on the company’s facilities is paid in advance on June 30. The rental period begins on July 1. Required: 1. Prepare an accrual basis income statement for 2018 (ignore income taxes). (Other expenses should be indicated with a minus sign.) 2. Determine the following balance sheet amounts on December 31, 2018

Explanation / Answer

Cash Book Balance beginning 29000 Add: Collections Fees customers 715000 Interest on note 4060 Loan from local bank 85000 Total receipts 804060 833060 Less: Payments Purchase of merchandise 398000 Annual Insurance 6960 Salaries and wages 218000 Dividends to shareholders 12000 Annual rent payment 28000 Total cash payments 662960 Balance ending 170100 Accounts receivable Balance ending 100000 Add: Collections 715000 815000 Less: Balance beginning 66000 Sales for the year 749000 Accounts payable Balance ending 130000 Add: Payments made 398000 528000 Less: Balance beginning 114000 Purchases for the year 414000 Inventory Balance beginning 88000 Add: Purchases 414000 502000 Less: Ending Inventory 66000 Cost of goods sold 436000 Interest revenue Interest received in cash 4060 Less: receivable on March 31, 2017 3045 received for current year 1015 Interest due on note receivable (9 months) 3045 Interest revenue for current year 4060 Insurance expense Annual insurance paid 6960 Less: prepaid for next year (4 months) 2320 use for current year (8 months) 4640 Add: prepaid on March 31, 2017 3300 Insurance expense for the year 7940 Interest expense Interest due for 2 months 850 Rent expense Annual rent paid 28000 Prepaid for next year 14000 Paid for current year 14000 Add: prepaid on Dec. 31, 2017 11800 Rent expense for the year 25800 Salary and wages expense Cash paid for salaries 218000 Less: Payable on 12/31/17 20800 Paid for current year 197200 Add: Payable on 12/31/18 25600 Salary expense for current year 222800 Income Statement For the year December 31, 2018 Sales revenue 749000 Less: Cost of goods sold 436000 Gross Profit 313000 Less: operating expense Insurance expense 7940 Depreciation expense 14000 Rent expense 25800 Salaries & wages 222800 Total operating expenses 270540 Operating Income 42460 Othere income / expenses Interest revenue 4060 Interest expnses -850 3210 Net Income 45670

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