Question

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 expenses?

4. How much is the cash basis net income?

Answer 1

1. Collections from sales = Beginning Accounts receivable + Sales - ending Accounts receivable

=1375000+10000000-1400000

= $9,975,000

2. Purchases = Ending inventory + Cost of goods sold - Beginning inventory

=2,500,000+5,300,000-2,100,000

= 5700000

Amount paid to suppliers = Beginning accounts payable + purchases - ending accounts payable

=1200000+5700000-1350000

= $5550000

3. Amount paid for operating expenses = Ending prepaid operating expenses + operating expenses - beginning prepaid operating expenses

=1000000+3800000-700000

= $4,100,000

4.

Income Statement (Cash basis)
Sales	$9,975,000
Less: Cost of goods sold	$5,550,000
Gross profit	$4,425,000
Less: Operating expenses	$4,100,000
Net income	$325,000