Use the following information to answer the next 4 questions. ABC Corp. was foun
ID: 2814338 • Letter: U
Question
Use the following information to answer the next 4 questions.
ABC Corp. was founded on 1/1/2018. The initial balance sheet is as follows:
Balance Sheet-1/1/2018
Assets
Liabilities and Owners Equity
Cash 7000
Debt
3500
Long Term Assets 500
Stock
4000
Total 7500
Total
7500
Suppose that the following transactions occurred between 1/1/2018 and 1/31/2018:
Inventory purchase of $1200 (due on 2/15/2018)
$950 worth of cash sales (paid in cash)
$1000 worth of credit sales (due on 3/31/2018)
Operating Accruals of $75
Depreciation of $90
Taxes of $100 (paid on 1/15/18)
Interest of $20 (paid on 1/20/18)
1. Which of the following will occur on the company's balance sheet as a result of the credit sales?
The cash account will increase and an accounts payable entry will be created.
The cash account will decrease and an accounts receivable entry will be created.
The cash account will be unaffected and an accounts receivable entry will be created.
The cash account will be unaffected and an accounts payable entry will be created
2. What is the cash entry balance on the 1/31/18 balance sheet?
3. What is the retained earnings entry on the 1/31/2018 balance sheet?
2940
1665
1755
2865
4. What is the company’s operating profit on 1/31/2018 if the company's COGS is 800?
1150
975
985
847
Balance Sheet-1/1/2018
Assets
Liabilities and Owners Equity
Cash 7000
Debt
3500
Long Term Assets 500
Stock
4000
Total 7500
Total
7500
Explanation / Answer
1. The cash account will be unaffected and an accounts receivable entry will be created.
2. $ 7,830
Cash :
3. $ 1,665.
4. $ 985 ( Total Sales - COGS - Operating Accruals - Depreciation )
Bal. 7,000 Taxes 100 Cash Sales 950 Interest 20 Bal. 7,830Related Questions
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