Slattery Company was formed on January 1, 2013, to build a single product. The c
ID: 2484736 • Letter: S
Question
Slattery Company was formed on January 1, 2013, to build a single product. The company issued no-par common stock on that date for $240,000 cash. The product costs $20 to make, all of which is paid in cash at the time of production. Slattery sells each unit of the product for $37 on credit and incurs sales commissions per unit of $3 cash. In 2013, Slattery produced 16,000 units, shipped 13,000 units, and received payment for 11,000 units. 1a. Prepare the 2013 income statement under revenue recognition at the completion of the earnings process. Prepare the 2013 ending balance sheet under revenue recognition at the completion of the earnings process. 1b. Prepare the 2013 income statement under revenue recognition prior to the completion of the earnings process. Prepare the 2013 ending balance sheet under revenue recognition prior to the completion of the earnings process. c. Prepare the 2013 income statement under revenue recognition at the completion of the earnings process as cash is received. Prepare the 2013 ending balance sheet under revenue recognition at the completion of the earnings process as cash is received.
Explanation / Answer
1. Income Statement under revenue Recognition at the completion of earning process as Cash Received Qty Rate Value Sales 13,000 37 481,000 Less:- Cost 13,000 20 260,000 Sales Commission 11,000 3 33,000 293,000 Profit 188,000 2. Balance Sheet Liability Amount Asset Amount common stock 240,000 Cash 294000 Profit 188,000 Account receivable 74000 (2000X 37) Inventory 60000 (3000X20) 428,000 428000 * Cash Common stock Issue 240,000 Add:- Collection from customer 407,000 (11000 X37) Less:- Payment (16000X20) (320,000) Less:- Commission (11000 x3) (33,000) Closing Cash 294,000
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