Question

For each of the following items, calculate the amount of revenue or expense that should be recognized on the income statement for Pelkey Co. for the year ended December 31, 2019: Required: a. Cash collected from customers during the year amounted to $876,000, and accounts receivable increased by $44,200. How much were sales on account for the year ended December 31, 2019? Expense incurred Revenues earned b. Cash payments for income taxes during the year were $219,000, and income taxes payable increased by $47.900. How much was income tax expense? Expense incurred

Answer 1

a) cash collected from customers amounted to $ 876,000 and accounts receivable increased by $44,200 then sales on account for year ended December 31, 2019,

= (closing account receivable - opening accounts receivable) + amount collected from customers

= $44,200 + $876,000

= $ 920,200 (Revenues earned)

b) cash payments for income taxes during the year were $219,000 and income taxes payable were increased by $47,900 , income tax expense is

= (closing balance - opening balance) + cash paid during the year

= $47,900 + $219,000

= $ 266,900 ( expenses incurred)

c) cash paid to suppliers during the year amount to $651,000 accounts payable decreased by $28,200 and inventories decreased by $20,800 then cost of goods sold is

= (opening stock - closing stock) + (closing account payable- opening accounts payable) + amount paid to suppliers

= $ 20,800 +(-$28,200) + $651,000

= $ 643,600 ( expenses incurred)

d) The net book value of building increased by $102,000 no buildings were sold and new buildings costing $280,000 was purchased during the year, the depreciation expense is

= (Opening assets balance - closing asset balance) + assets bought - assets sold

= (-$102,000) + $280,000 - 0

= $ 178,000 ( expenses incurred)