Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of the year, her accountant computes her accrual basis income that is used on her tax return. For 2015, Selma had cash receipts of \$1.4 million, which included \$200,000 collected on accounts receivable from 2014 sales. It also included the proceeds of a \$100,000 bank loan. At the end of 2015, she had \$250,000 in accounts receivale from customers, all from 2015 sales.Required:a. Compute Selma's accrual basis gross receipts for 2015.b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2020 was \$1,300,000. At the end of 2019, she had merchandise on hand with a cost of \$150,000. At the end of 2020, the cost of merchandise on hand was \$300,000. Compute Selma's gross income (profit) from merchandise sales for 2015.

a. \$1,350,000

b. \$200,000

Explanation:

The computation is shown below;

a. Accrual basis gross receipts for the year 2015 is

= Cash receipts + account receivable from year 2015 - collection in account receivable - proceeds of bank loan

= \$1,400,000 + \$250,000 - \$200,000 - \$100,000

= \$1,350,000

b. Now the Gross income or profit is

As we know that

Gross profit is

= Sales - cost of goods sold

= \$1,350,000 - (\$1,300,000 + \$150,000 - \$300,000)

= \$1,350,000 - \$1,150,000

= \$200,000

Selma's accrual basis gross receipts for 2015 would be \$1,350,000, and her gross income (profit) from merchandise sales for the same year would be \$200,000.

Explanation:

To calculate Selma's accrual basis gross receipts for 2015, we need to adjust her cash receipts, which totals up to \$1.4 million. The receipts include \$200,000 that was actually earned in 2014 (collected in 2015) and a \$100,000 bank loan that does not count as earned revenue. So, we subtract these from the total receipts: \$1,400,000 - \$200,000 - \$100,000 = \$1,100,000. And we add the amounts receivable at the end of 2015 which is \$250,000. So, Selma's accrual basis gross receipts for 2015 is \$1,350,000 (\$1,100,000 + \$250,000).

For the second part of your question, Selma's gross income (profit) from merchandise sales for 2015 can be computed by calculating the cost of goods sold (COGS) and subtracting this from the gross receipts calculated above. Start by adding the cost of merchandise on hand at the end of 2019 (\$150,000) to the purchases made in 2020 (\$1,300,000). This gives us a presupposed cost of goods available for sale. We then subtract the cost of the merchandise on hand at the end of 2020 (\$300,000). The COGS is, therefore, \$1,150,000. Subtraction the COGS from the gross receipts gives us a gross income of \$200,000 (\$1,350,000 - \$1,150,000).

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Related Questions

A company is considering investing in a project that costs \$300,000. The company uses straight-line depreciation and estimates that the project has a useful life of 10 years with no salvage value. This project is expected to produce NET INCOME of \$42,000 each year. Assuming a minimum rate of return of 10%, indicate the NET PRESENT VALUE of this project. a. \$41,928
b. \$258,072
c. \$120,000
d. \$142,409

NPV = \$-41,928.18

Explanation:

Net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator:

Cash flow in year 0 = \$-300,000

Cash flow each year from year 1 to 10 = \$42,000

I = 10%

NPV = \$-41,928.18

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

b. \$258,072

Explanation:

PERIOD              CASH FLOW                   NET PRESENT VALUE

Year 1                       \$42,000

Year 2                      \$42,000

Year 3                      \$42,000

Year 4                      \$42,000

Year 5                      \$42,000

Year 6                      \$42,000

Year 7                      \$42,000

Year 8                      \$42,000

Year 9                      \$42,000

Year 10                     \$42,000

Total                                                                          \$258,071.83

Identify an advertisement or commercial that targets only one of the generational groups. Describe the promotion in detail and identify the intended group.

Answer: Commercial washing soaps

Explanation: The target of these commercials can be aimed at housewives, commercials tend to highlight the characteristics of how the clothes will look after the use of the product, such as effectiveness, freshness, softness and smell.

Housewives or people in charge of doing laundry at home, in turn, look for an effective product that can alleviate the time it takes to perform this household work.

On January 1, Merry Walker established a catering service. Listed below are accounts to use for transactions (a) through (f), each identified by a number. Following are the transactions that occurred in Walker's first month of operations. You need to indicate for each transaction the accounts that should be debited and credited by selecting the account number(s). 1. Cash
2. Accounts Receivable
3. Supplies
4. Prepaid Insurance
5. Equipment
6. Truck
7. Notes Payable
8. Accounts Payable
9. Merry Walker, Capital
10. Merry Walker, Drawing
11. Fees Earned
12. Wages Expense
13. Rent Expense
14. Utilities Expense
15. Truck Expense
16. Miscellaneous Expense
17. Insurance Expense

a. Recorded jobs completed on account and sent Invoices to customers.

Account to be Debited ⇒ 2. Accounts Receivable

Account to be Credited ⇒ 11. Fees Earned

The fees are to be credited as it is revenue. The amount will be debited to Accounts receivables because the customers owe the company.

b. Received an invoice for truck expense to be paid in February.

Account to be Debited ⇒ 15. Truck Expense

Account to be Credited ⇒ 8. Accounts Payable

This is an expense so it is debited as expenses are debited when they increase. As it is to be paid in future, it is a liability and will be credited to Payables.

c. Paid utilities expense

Account to be Debited ⇒ 14. Utilities Expense

Account to be Credited ⇒ 1. Cash

As explained, this is an expense and will have to be debited. It was paid with cash which will reduce the cash balance so Cash should be credited.

d.  Received cash from customers on account

Account to be Debited ⇒ 1. Cash

Account to be Credited ⇒ 2. Accounts Receivable

Debtors are paying the company cash which will increase the cash balance so Cash is debited. The Receivables will be credited to reflect that they are decreasing from the debt settlement.

e. Paid Employees Wages

Account to be Debited ⇒ 12. Wages Expense

Account to be Credited ⇒ 1. Cash

As explained, this is an expense and will have to be debited. It was paid with cash which will reduce the cash balance so Cash should be credited.

f. Withdrew cash for personal use.

Account to be Debited ⇒ 10. Merry Walker, Drawing

Account to be Credited ⇒ 1. Cash

The owner withdrew cash for personal use and so this is sent to the Drawings account. It is debited to reflect that it is reducing capital. Cash will be credited as it is decreasing.

In a catering business transaction, you would debit the receiver and credit the giver account for each transaction. Such accounts may include Cash, Supplies, Fees Earned, etc. However, without specific details on transactions (a) through (f), more specific account identification cannot be provided.

Explanation:

The transaction entries would follow the standard principle of accounting - debit the receiver, credit the giver. It would also adhere to another principle - debit what comes in and credit what goes out. Each transaction would affect two accounts; one involves a debit entry, while the other one a credit entry.

For instance, if Merry Walker purchased supplies by cash (Transaction a), it would result in a debit to Supplies (3) and credit to Cash (1). If Merry received cash for catering services provided (Transaction b), Fees Earned (11) would be credited and Cash would be debited (1).

I cannot be more specific without seeing the details of transactions (a) through (f) that you mentioned. However, the principles mentioned above will guide you in identifying the accounts to debit and credit for each transaction.

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When a famous painting becomes available for sale, it is often known which museum or collector will be the likely winner. Yet, the auctioneer actively woos representatives of other museums that have no chance of winning to attend anyway. Suppose a piece of art has recently become available for sale and will be auctioned off to the highest bidder, with the winner paying an amount equal to the second highest bid. Assume that most collectors know that Janet places a value of \$125,000 on the art piece and that she values this art piece more than any other collector. Suppose that if no one else shows up, Janet simply bids \$125,000/2 = \$5,000 and wins the piece of art.

The expected price paid by Kenji, with no other bidders present, is \$:_________
Suppose the owner Of the artwork manages to recruit another bidder, Manuel, to the auction. Manuel is known to value the art piece at \$8,000.
The expected price paid by Kenji, given the presence of the second bidder Manuel, is \$:_________

1. If there are no other bidders present as from question them we can conclude that Kenji would buy the art piece for \$5000. See question

2. If there is a bidder present in the name of Manuel who would bid for \$8000 then Kenji would bid at \$8000 and win the bid for the art piece. See question. Kenji would bid at price of 2nd highest bidder to win the bid for art piece

When a parent uses the equity method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is false before making adjustments on the consolidated worksheet? A. Parent company net income equals controlling interest in consolidated net income.
B. Parent company retained earnings equals consolidated retained earnings.
C. Parent company total assets equals consolidated total assets.
D. Parent company dividends equals consolidated dividends.
E. Goodwill will not be recorded on the parent's books.

Answer: The correct answer is "C. Parent company total assets equals consolidated total assets".

Explanation: The statement "C. Parent company total assets equals consolidated total assets" is false before making adjustments on the consolidated worksheet when a parent uses the equity method because the parent company total assets are not equal to consolidated total assets.

Big and Tall, CPAs, were auditing Mountain Corporation for the year ended December 31, 2019. On January 15, 2020, a major customer of Mountain Corporation declared bankruptcy as the result of an uninsured loss due to a major fire in their warehouse on January 10, 2020. As a result, a material accounts receivable from the customer was determined to be uncollectible. Big and Tall, CPAs, would expect the client to:________. A. Record the loss on uncollectible accounts as a routine transaction in the year 2020.
B. Treat the loss as a subsequent event and adjust the 2019 financial statements to record the loss on uncollectible accounts.
C. Treat the loss as a subsequent event and provide a footnote about the loss in the 2019 financial statements.
D. File a lawsuit against the customer in hopes of collecting some of the money owed to the client.