Question

1. Harris Inc. had salaries payable of $90,000 as of January 1 and $40,000 as of December 31. During the year, Harris showed $1,550,000 in salaries expense on the income statement. Cash outflows for salaries for the year were

a. $1,500,000 b. $1,550,000 c. $1,600,000 d. $1,630,000

2. Toolson Corporation reported net income of $160,000 for the current year ended June 30. Accounts receivable had a beginning balance of $34,000 and an ending balance of $48,000. Accounts payable had a beginning balance of $29,000 and an ending balance of $45,000. Assuming that this is all of the relevant information, Toolson's cash flows from operating activities are

a. $130,000 b. $162,000 c. $158,000 d. $190,000

3. JKL Company enters into a contract with Craven Library to help them streamline their purchasing process. The contract specifies that Craven Library will pay JKL $270,000 in the form of a fixed fee plus an additional $10,000 if the library achieves $200,000 in cost savings. JKL estimates a 55% chance that the library will achieve a $200,000 savings. Assuming JKL estimates that the transaction price is the expected value transaction price. The transaction price is recorded as

a. $270,000 b. $275,500 c. $280,000 d. $264,500

4. Porter Labs is a wholesaler who sells microscopes for use in high schools to retailers. On August 1 Porter contracts with the LMN to sell 1900 microscopes to LMN to be delivered September 1. The contract price is set at $820 each, with a 20% volume discount if sales exceed 2,500 microscopes within the year. The probability of sales of 2,500 microscopes is expected to be 53%. Using the most-likely-amount approach the consideration to be recognized is estimated to be

a. $1,558,000 b. $1,246,400 c. $1,502,000 d. $1,392,852

Answer 1

Dear student, only one question is allowed at a time. I am answering the first question

1)

As per accrual system of accounting, income and expenses should be recognized in the period in which they are incurred even if amount is not yet received or paid for the same

So, as per accrual system of accounting, salaries payable as on January 1 of $90,000 were already recognized as expenses in previous year but were paid in the current year

$40,000 pending for payment is already recognized as expenses in the expenses for the year and is included in salaries expenses of $1,550,000 but it is unpaid

So, total outflow in the form of cash

= Expenses recognized + Opening expenses payable – Closing expenses payable

= $1,550,000 + $90,000 - $40,000

= $1,600,000

So, as per above calculations, option c is the correct option