Question

Question 4 of 9 3.5/7 E View Policies Show Attempt History Current Attempt in Progress 1. 2. On January 1, 2020, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing $91,316 cash. The new company, Sheffield Sales and Service, has the following transactions during January Pays $12,000 in advance for 3 months' rent of office, showroom, and repair space. Purchases 42 personal computers at a cost of $1,664 each, 8 graphics computers at a cost of $2,664 each, and 27 printers at a cost of $464 each paying cash upon delivery. Sales, repair, and office employees earn $13,916 in salaries and wages during January, of which $4,316 was still payable at the end of January Sells 32 personal computers at $2,714 each, 6 graphics computers for $3,764 each, and 17 printers for $664 each; $76,316 is received in cash in January, and $44,404 is sold on a deferred payment basis. Other operating expenses of $9,716 are incurred and paid for during January: $3,316 of incurred expenses are payable at January 31. 3. 4. 5. (a) Your answer is correct.

Answer 1

• to make balancesheet we first required to prepare income statement:
• 
  Cash Basis Accrual Basis 76316 120720 103728 INCOME STATEMENT Revenue Actuallu received I.e. 76316 (32 personal computer * $2714)+(6 graphic computer $3764 ) +(17 printers *664) =86848 +22584 +11288 = 120720 less : Expense Cost of computers and printers purchased and paid (42 personal computer * $1664)+ (8 graphic computer * $2664) +(27 printers *464) =69888 +21312 +12528 = 103728 purchased and sold (32 personal computer * $1664)+ (6 graphic computer * $2664 ) +(17 printers *464) =53248+15984 +7888 = 77120 salaries and wages accrued and paid (13916 accrued - payable 4316) = 9600 paid accrued i.e. 13916 Rent paid i.e. 12000 accrued and paid (12000 *1 month/ 3 month) = 4000 Other Operating expeses paid i.e. 9716 accrued and payable = 9716 paid +3316 payable = 13032 Total expenses Net income/ (loss) 77120 9600 13916 12000 4000 9716 13032 -108068 -135044 -58728 12652
  

BALANCE SHEET

Asset	Cash Basis	Accrual Basis
Cash	32588	32588
Account receivable
Nil as sales recorded only on receipt	0
sales on deferred payement i.e. 44404		44404
Inventory
nil as entire purhcase is recognized as expense on cash payment basis	0
purchased and unsold (10 (i.e. 42purchased- 32 sold) personal computer * $1664)+ (2 (i.e. 8 Purchased- 6 sold)graphic computer * $2664 ) +(10 (i.e. 27 purchased- 17 sold)printers *464) =16640+5328 +4640 = 26608		26608
Prepaid rent
nil as expensed on payment basis	0
paid- accrued = 12000- 4000 = 8000		8000
Total Assets	32588	111600
Liabilties and owners equity
Account payable
Nil as purchase / expense is recognised only upon payement	0
Other operating expense payable i.e. 3316		3316
Salary and wages payable
Nil as purchase / expense is recognised only upon payement	0
salary payable i.e. 4316		4316
Owners Capital
intial contribution + income (loss)
91316 + (58728)	32588
91316 + 12652		103968
Total Liabilties and owners equity	32588	111600

WROKING NOTE : CASH BALANCE

	AMOUNT
capital contribution	91316
cash sales	76316
payement of…
cash purchase	-103728
rent	-12000
operating expense	-9716
salary	-9600
cash balance	32588