Selected balance sheet information for the Wolf Company at November 30, and Dece

Question

Selected balance sheet information for the Wolf Company at November 30, and December 31, 2011, is presented below. The company uses the perpetual inventory system and all sales to customers are made on credit. The following cash flow information also is available: Cash collected from credit customers-$80,000. Cash paid for insurance-$5,000. Cash paid to suppliers of inventory-$60,000 (the entire accounts payable amounts relate to inventory purchases). Cash paid to employees for wages-$10,000. Required: Determine the following for the month of December: Sales revenue Cost of goods sold Insurance expense Wage expense Prepare a summary journal entry to record the month's sales and cost of those sales.

Explanation / Answer

1.
a. Sales revenue = cash collected from credit customers minus decrease in accounts receivable = 80,000 - 7,000 = 73,000

(some of the cash collected was to pay off AR)

answer: sales revenue = $73,000

b.
cost of goods sold = cash paid to suppliers of inventory minus increase in inventory = 60,000 - 2,500 = 57,500

(some of the inventory bought wasn't sold but increased the inventory)

answer: cost of goods sold = $57,500

c. insurance expense = cash paid for insurance minus increase in prepaid insurance = 5,000 - 2500 = 2500

(some of the insurance paid for didn't expire, instead it increased prepaid insurance)

answer: insurance expense = $2,500

d. wage expense = cash paid to employees for wages minus decrase in wages payable = 10,000 - 2,000 = 8,000

(some of the cash paid for wages paid off wages payable)

answer: wages expense = $8,000

2.

Debit: Accounts receivable 73,000
Credit: Sales revenue 73,000

Debit: Cost of goods sold 57,500
Credit: Inventory 57,500

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