A sold a bike for 3600 in June. A paid the manifacture for the bike in April. A

Question

A sold a bike for 3600 in June. A paid the manifacture for the bike in April. A received a 900 payment from Zip and Zap in June, and will pay the additional 2700 in July.

1. If A used the accrual basis of accounting, then gross profit on the Income statement for the month of June would be: A. 2100 B 900 C2700 D1500

2.If A used the cash basis of accounting, then:

A Sales Revenue will be 3600 in June

B Sale Revenue will be 2700 in June and 900 in July

C Sale Revenue will be 900 in June and 2700 in July

D Sale Revenue will be 3600 in July

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Q1 Gross profit = Sales - COGS Sales in 3,600 as per accrual basis However COGS is not given thus gross profit cannot be computed Q2 C Sale Revenue will be 900 in June and 2700 in July Since cash of 900 is received in June and remaining 2700 would be received in Juy and as per cash basis revenue is recognised when cash is received.

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