HORNGREN'S FINANCIAL & MANAGERIAL ACCO
16th Edition
ISBN: 9781323425084
Author: MILLER-NOBLES
Publisher: PEARSON C
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Chapter 1, Problem 1.38E
Preparing the statement of
Bean Town Food Equipment Company had the following transactions for the month ending February 29, 2016. Bean Town’s cash balance on February 1, 2016, was $16,400.
| Feb. 1 | Common stock was issued to stockholders for $7,500 cash. |
| 7 | Purchased equipment for $2,500 on account. |
| 14 | Paid $18,000 cash for land. |
| 17 | Paid cash expenses: employees’ salaries, $1,500; office rent, $1,800; utilities, $500. |
| 23 | Paid cash dividends of $3,000. |
| 26 | Earned service revenue for the month, $8,000, receiving cash. |
Prepare the statement of cash flows of Bean Town Food Equipment Company for the month ended February 29, 2016.
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Baker Company had the following balances in its accounting records as of December 31,2016:
Assets
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$35,000
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Cash-Basis and Accrual-Basis Accounting
The records of Summers Building Company reveal the following information for 2011.
a. Cash receipts during 2011 (including $50,000 paid by stockholders in exchange for common stock) were $271,000.
b. Cash payments during 2011 (including $7,600 of dividends paid to stockholders) were $164,850.
c. Total selling price of services billed to customers during 2011 was $201,600.
d. Salaries earned by employees during 2011 were $113,430.
e. Cost of supplies used during 2011 in operation of the business was $47,255.
Required:
1. Calculate Summers Building Company's net income for 2011 on an accrual basis.
$
2. Calculate Summers Building Company's net income for 2011 on a cash-basis.
$
3. Explain how the cash-basis of accounting allows for the manipulation of income.
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Chapter 1 Solutions
HORNGREN'S FINANCIAL & MANAGERIAL ACCO
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