Revenue Expense and Recognition Carrico Advertising Inc. performs advertising se
ID: 2461795 • Letter: R
Question
Revenue Expense and Recognition
Carrico Advertising Inc. performs advertising services for several Fortune 500 companies. The following information describes Carrico's activities during 2013.
At the beginning of 2013, customers owed Carrico $45,800 for advertising services performed during 2012. During 2013, Carrico performed an additional $695,100 of advertising services on account. Carrico collected $708,700 cash from customers during 2013.
At the beginning of 2013, Carrico had $13,350 of supplies on hand for which it owed suppliers $8,150. During 2013, Carrico purchased an additional $14,600 of supplies on account. Carrico also paid $19,300 cash owed to suppliers for goods previously purchased on credit. Carrico had $2,230 of supplies on hand at the end of 2013.
Carrico's 2013 operating (including supplies expense) and interest expenses were $437,600 and $133,400, respectively.
Required:
1. Calculate Carrico's 2013 income before taxes.
$
2. Calculate the ending balance of accounts receivable, the supplies used, and the ending balance of accounts payable.
Ending balance of accounts receivable $ Supplies used $ Ending balance of accounts payable $Explanation / Answer
Statement showing income before taxes Particulars Amount Services Rendered 695,100.00 Supplies Expense = Op+ Pur - Closing (25,720.00) Operating Expense = 437600 - 25720 (411,880.00) Interest (133,400.00) Total Income before tax 124,100.00 Opening Accounts Payable 8,150.00 Supplies Purchased on Account 14,600.00 Cash paid to suppliers 19,300.00 Closing AP = Op+Purchases - Cash paid 3,450.00 Opening Supplies 13,350.00 Supplies Purchased on Account 14,600.00 Closing Supplies 2,230.00 Supplies Expense or Supplies used = Op+ Pur - Closing 25,720.00 Opening Accounts Receivable 45,800.00 Services Rendered 695,100.00 Cash collected 708,700.00 Closing AR = Op + Services - Cash collected 32,200.00
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