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?
Answer 1 Collection from sales
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
Answer 2 paid to supplier
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
Answer 3 operating expenses
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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