Question

1) ABC Company started business on January 1, 2018 and had the following transactions in the month of January 2018: 1. On January 2, ABC sold shares of the company and received $800,000 in cash 2. On January 4, the company bought inventory for resale from RTY Co. and promised to pay cash at a later date. The cost of the inventory was $400,000. 3. On January 8, ABC sold inventory to YUT Co. at a sale price of $400,000. YUT paid $200,000 in cash and agreed to pay the balance at a later date. The cost of the inventory sold was $250,000. 4. On January 15, ABC sold inventory to HNG Co, at a sale price of $200,000 and received the full amount in cash on that day. The cost of the inventory sold was $140,000. 5. On January 31, the company paid rent of $20,000, which was the rent for the sales office for the month of January. 6. The company paid $300,000 in cash to RTY Co. as partial payment for the inventory they purchased on January 4. 7. On January 31, the company paid $50,000 in cash for salary earned by employees in the month of January. 8. On January 31, the company received $150,000 in cash from YUT as partial payment fo the amount owed by YUT for the sale made on January 8. Required: (Show all calculations) a. What is the cash balance of ABC as of January 31, 2018? b. What is the balance in Accounts Receivable as of January 31, 2018? c. What is the balance in Accounts Payable as of January 31, 2018? d. What is the cost of the inventory still in ABC's possession as of January 31, 2018? 70-Days 1-3

Answer 1

a.

Cash Account
1/2/18 Common Stock	800,000	1/31/18 Rent expense	20,000
1/8/18 Sales Revenue	200,000	1/31/18 Accounts payable	300,000
1/15/18 Sales Revenue	200,000	1/31/18 Salaries expense	50,000
1/31/18 Accounts receivable	150,000	1/31/18 Ending Balance	980,000
	1,350,000		1,350,000

Cash balance as on January 31,2018 is $ 980,000

b.

Accounts receivable
1/8/18 Sales revenue	200,000	1/31/18 Cash	150,000
		1/31/18 Ending Balance	50,000
	200,000		200,000

Accounts receivable balance as on January 31,2018 is $50,000

c.

Accounts payable
1/31/18 Cash	300,000	1/4/18 Inventory	400,000
1/31/18 Ending Balance	100,000
	400,000		400,000

Accounts payable balance as on Jan 31,2018 is $100,000

d.

Inventory
1/4/18 Accounts payable	400,000	1/8/18 Cost of goods sold	250,000
		1/15/18 Cost of goods sold	140,000
		1/31/18 Ending balance	10,000
	400,000		400,000

Cost of inventory still in the possession is $10,000

e.

Sales revenue
		1/8/18 Cash	200,000
		1/8/18 Accounts receivable	200,000
		1/15/18 Cash	200,000
Total	600,000	Total	600,000

Total Sales revenue is $600,000

f.

Cost of Goods sold
1/8/18 Inventory	250,000
1/15/18 Inventory	140,000	1/31/18 Ending balance	390,000
	390,000		390,000

Cost of inventory sold is $390,000

g.

Total Expenses
Cost of goods sold	390,000
Rent expense	20,000
Salaries expense	50,000
Total Expenses	460,000

h.

Profit
Total Sales revenue	600,000
Less: Expenses
Cost of goods sold	-390,000
Rent expense	-20,000
Salaries expense	-50,000
Profit	140,000

i.

Balance in Stockholders' Equity as on Jan 31, 2018
Common Stock	800,000
Net profit	140,000
Total Balance of Stockholders	940,000

j.

ABC Company
Income statement
For the month ended January 31,2018
Sales revenue	600,000
Less: Cost of goods sold	-390,000
Gross profit (A)	210,000
Expenses:
Rent expense	20,000
Salaries expense	50,000
Total Expenses (B)	70,000
Net profit (A-B)	140,000

k.

ABC Company
Balance sheet
For the month ended January 31,2018
Assets		Liabilities and Stockholders' Equity:
Cash	980,000	Accounts payable	100,000
Accounts receivable	50,000
Inventory	10,000	Stockholder's Equity:
		Common Stock	800,000
		Retained Earnings	140,000
		Total Stockholders' Equity	940,000
Total Assets	1,040,000	Total Liabilities and stockholder's Equity	1,040,000

Calculations:

Date	Account Titles and Explanation	Debit	Credit
Jan.2	Cash	800,000
	Common stock		800,000
	[Sold common shares]
Jan.4	Inventory	400,000
	Accounts payable		400,000
	[Purchase of inventory on account]
Jan.8	Cash	200,000
	Accounts receivable	200,000
	Sales revenue		400,000
	[Sales on account and for cash]
	Cost of goods sold	250,000
	Inventory		250,000
	[Cost of sales]
Jan.15	Cash	200,000
	Sales revenue		200,000
	[Sold for cash]
	Cost of goods sold	140,000
	Inventory		140,000
	[cost of sales]
Jan.31	Rent Expense	20,000
	Cash		20,000
	[Rent expense paid]
Jan.31	Accounts payable	300,000
	Cash		300,000
	[Paid to suppliers]
Jan.31	Salaries Expense	50,000
	Cash		50,000
	[Paid salaries expense]
Jan.31	Cash	150,000
	Accounts receivable		150,000
	[Cash received from customers]