T. R. Price Corporation was formed on April 1, 20xo, when some stockholders inve
ID: 2409946 • Letter: T
Question
T. R. Price Corporation was formed on April 1, 20xo, when some stockholders invested S200,000 in cash in the company. During the first week of April, the company spent $80,000 cash for merchandise inventory (sportswear) During the remainder of the morth, total sales rcached $100,000, of which $65,000 was on open account. The cost of the inventory sold was $42,000. For simplicity, assume that no other transactions occurred except that on April 28, T. R. Price Corporation acquired S15,000 additional inventory on open account. Requirements 1. By using the balance shect cquation approach, analyze all transactions for April. 2. Prepare a balance sheet for Apnil 3D, 20x0. 3. Prepare two statements for April, side by side. The first should use the accrual basis of accounting to compute net income, and the second, the cash basis to compute the difference between cash inflows and cash outfows. Which basis provides a more informative measure of economic performance? Why?Explanation / Answer
Answer 1) Balance Sheet Equation Approach
a) Capital = $200,000 Cash = $200,000
b) Capital = $200,000 Cash = $120,000
Inventory = $ 80,000
c) Capital = $200,000 Cash = $155,000
Profit = $ 58,000 Inventory = $ 38,000
Receivables = $ 65,000
d) Capital = $200,000 Cash = $140,000
Profit = $ 58,000 Inventory = $ 53,000
Receivables = $ 65,000
Answer 2) Balance Sheet for April 30, 20X0
Total $258,000 Total $258,000
Answer 3) Statements for April 30, 20X0 (Accrual Basis Accounting)
Answer 3) Statements for April 30, 20X0 (Cash Basis Accounting)
$100,300
Accural Basis of Accounting provides a more informative measure of economic performance.
Laibilities Amount Assests Amount Capital $200,000 Cash $140,000 Profit & Loss $ 58,000 Inventory $ 53,000 Debtor $ 65,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.