Question

On January 1, 2020, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing $90,176 cash. The new company, Nash Sales and Service, has the following transactions during January.

1.		Pays $6,000 in advance for 3 months’ rent of office, showroom, and repair space.
2.		Purchases 42 personal computers at a cost of $1,604 each, 8 graphics computers at a cost of $2,604 each, and 27 printers at a cost of $404 each, paying cash upon delivery.
3.		Sales, repair, and office employees earn $12,776 in salaries and wages during January, of which $3,176 was still payable at the end of January.
4.		Sells 32 personal computers at $2,654 each, 6 graphics computers for $3,704 each, and 17 printers for $604 each; $75,176 is received in cash in January, and $42,244 is sold on a deferred payment basis.
5.		Other operating expenses of $8,576 are incurred and paid for during January; $2,176 of incurred expenses are payable at January 31.

(a) Using the transaction data above, prepare (1) a cash-basis income statement and (2) an accrual-basis income statement for the month of January. (Enter loss using either a negative sign preceding the number, e.g. -45 or parentheses e.g. (45).) NASH SALES AND SERVICE Income Statement (1) Cash Basis (2) Accrual Basis $ > > $ $

Answer 1

Solution;

NASH SALES AND SERVICE
Income statement
	Cash basis	Accrual basis
Sales	75,176	117420
Less: Expenses
Purchases and paid	99108
Cost of goods sold		73820
Rent paid	6,000	2000
Salary expense	9,600	12,776
Operating expense	8,576	10,752
Total expense	123284	99348
Net income/loss	-48,108	18,072

	Cash basis	Accrual basis
Assets
Cash	42,068	42,068
Accounts receivable		42,244
Inventory		25288
Prepaid rent		4,000
Total assets	42,068	1,13,600
Liabilities and owners equity
Accounts payable		2,176
Salaries payable		3,176
Owners' equity	42,068	1,08,248
Total liabilities and owners' equity	42068	113600

9 Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X % Cut AutoSum Calibri 11 A A Wrap Text General Normal Bad Good La Copy Fill- Paste B 1 U- *Merge & Center Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells C90 A B с D E F G H 1 J K L M N o Р 0 66 67 68 90,176 6,000 NASH SALES AND SERVICE Income statement Cash basis Accrual basis 75,176 117420 69 42 8 2604 70 71 72 73 cash 1 pay advance rent 2 purchase 2 3 salary expense 4 sales personal and graphical computer 4 5 operating expense 3 1,604 404 3,176 2654 27 12,776 32 17 8,576 99108 6 3704 74 604 75,176 42,244 Sales Less: Expenses Purchases and paid Cost of goods sold Rent paid Salary expense Operating expense Total expense Net income/loss 2,176 6,000 9,600 8,576 123284 -48,108 73820 2000 12,776 10,752 99348 18,072 Cash basis Accrual basis 42,068 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 Assets Cash Accounts receivable Inventory Prepaid rent Total assets Liabilities and owners equity Accounts payable Salaries payable Owners' equity Total liabilities and owners' equity 42,068 42,244 25288 4,000 1,13,600 42,068 O 2,176 3,176 1,08,248 113600 42,068 42068 94 95 96 97 KO Sheet157 Sheet158 Sheet159 Sheet160 Sheet161 Sheet162 Sheet163 Sheet164 Sheet165 Sheet166 Sheet167 III Ready M 100% 1 1 Type here to search O I 47% D (.)) ENG 02:15 20-09-2020

9 Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X * Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good Fill Paste B 1 U- A, *Merge & Center Calculation Ea Copy Format Painter Clipboard Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format 2 Clear Sort & Find & Filter - Select Editing Font Alignment Number Styles Cells E84 fx A B С D E F G H | K L 66 67 68 69 1 70 2 90176 cash pay advance rent purchase NASH SALES AND SERVICE Income statement Cash basis =E74 6000 3 Accrual basis =(D73*C73)+(F73*E73)+(D7 42 1604 8 2604 71 2 27 72 3 12776 404 3176 2654 salary expense sales personal and graphical computer =(D70*C70)+(F70*E70)+(D71*C71) 32 6 3704 73 4 74 4 75176 42244 17 8576 604 2176 Sales Less: Expenses Purchases and paid Cost of goods sold Rent paid Salary expense Operating expense Total expense Net income/loss operating expense =C69 =C72-D72 =C75 =SUM(172:176) =J70-177 =(F70*E73)+(D71*C74)+(D7 =C69/D69 =C72 =C75+D75 =SUM(K73:K76) =K70-677 Cash basis Accrual basis =C68+)70-177 O 75 5 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 KO Assets Cash Accounts receivable Inventory Prepaid rent Total assets Liabilities and owners equity Accounts payable Salaries payable Owners' equity Total liabilities and owners' equity =C68+)70-177 =K70-170 =J72-673 =J74-K74 =SUM(K83:K86) =SUM(183:186) =K76-J76 =K75-J75 =K78+C68 =SUM(K89:691) =J83 =SUM(189:191) Sheet157 Sheet158 Sheet159 Sheet160 Sheet161 Sheet162 Sheet163 Sheet164 Sheet165 Sheet166 Sheet167 III Ready W 100% U 1 Type here to search O חד 47% O » ENG 02:15 20-09-2020 1