Question

Exercise 3-44 (Algorithmic) Revenue Expense and Recognition Carrico Advertising Inc. performs advertising services for several Fortune 500 companies. The following information describes Carrico's activities during 2019. a. At the beginning of 2019, customers owed Carrico $45,800 for advertising services performed during 2018. During 2019, Carrico performed an additional $693,700 of advertising services on account. Carrico collected $708,700 cash from customers during 2019. b. At the beginning of 2019, Carrico had $13,280 of supplies on hand for which it owed suppliers $8,150. During 2019, 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 2019. c. Carrico's 2019 operating and interest expenses were $437,600 and $140,300, respectively. Required: 1. Calculate Carrico's 2019 income before taxes. 2. Calculate the ending balance of accounts receivable, the supplies used, and the ending balance of accounts payable. Enter all amounts as positive values Ending balance of accounts receivable Supplies used Ending balance of accounts payable

Answer 1

Answer:

1.

Computation of Carrico's 2019 Income before taxes:

Net Income before taxes = Revenues - Expenses

Particulars	Amount ($)
Advertising revenue	693,700
Less:
Supplies Expense ($13,280 + $14,600 - $2,230)	(25,650)
Operating Expense	(437,600)
Interest	(140,300)
Total Income before tax	90,150

2.

Computation of Ending balance of accounts receivable:

Particulars	Amount ($)
Opening Accounts Receivable	45,800
Add: Services Rendered	693,700
Less: Cash collected	(708,700)
Ending balance of accounts receivable	30,800

Computation of Supplies used:

Particulars	Amount ($)
Opening Supplies	13,280
Add: Supplies Purchased on Account	14,600
Less: Closing Supplies	2,230
Supplies used	25,650

Computation of Ending balance of accounts payable:

Particulars	Amount ($)
Opening Accounts Payable	8,150
Add: Supplies Purchased on Account	14,600
Less: Cash paid to suppliers	(19,300)
Ending balance of accounts payable	3,450