Question

# Use the following information for the next four (4) questions. Bel Air Company provided the following...

Use the following information for the next four (4) questions. Bel Air Company provided the following data for the current year:

Sales - 10,000,000

Cost of goods sold-5,300,000

Operating Expense- 3,800,000

 December 31 January 1 Preparing operating expense 1,000,000 700,000 Accounts Payable 1,350,000 1,200,000 Inventory 2,500,000 2,100,000 Accounts receivable 1,400,000 1,375,000

1. How much was the collections from sales?

2. What amount was paid to suppliers?

3. How much was paid for operating expense?

4. How much is the cash basis net income?

Total Sales this year 10,000,000

Plus + account receivables opening 1,375,000

Minus (-) account receivables closing 1,400,000

Therefore cash collected from sales is 9,975,000

Goods purchased in year = cost of goods sold + closing inventory - opening inventory

Which is 5,300,000 + 2,500,000 (-) 2,100,000

= 5,700,000

Now amount paid to suppliers are purchases during year + opening accounts payable (-) closing accounts payable

= 5,700,000 +1,200,000 (-) 1,350,000

= 5,550,000

Operating expenses paid during year = operating expenses for the year + opening balance (-) closing balance

= 3,800,000 + 700,000 (-) 1,000,000

= 3,500,000

Answer 4 cash basis net income

Total collection (-) operating expenses (-) paid to suppliers

= 9,975,000 (-) 3,500,000 (-) 5,550,000

= 925,000

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