Q) ABC Company uses cash-basis accounting for its records. During 2010, ABC coll

Question

Q)  ABC Company uses cash-basis accounting for its records. During 2010, ABC collected $400,000 from its                                  

                          customers, made payments of $300,000 to its suppliers for inventory, and paid $140,000 for operating costs. ABC                 

                          wants to prepare accrual-basis financial statements. In gathering information for the accrual-basis financial                 

                          statements, ABC discovered the following:                 

? Customers owed ABC $45,000 at the beginning of 2010 and $55,000 at the end of 2010.                 

                    ? ABC owed suppliers $20,000 at the beginning of 2010 and $28,000 at the end of the 2010.                 

                    ? ABC

Explanation / Answer

Revenue earned/ Sales = 400,000 +55000 -45000 = $410,000

Purchase = 300,000 +28000 -20000 = $308000

Cost Of Good Sold = 308000+ 40000 - 44000 = $304000

Gross Profit = 410000 - 304000 = $106000

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