Question

2. On January 1, 2020, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing $91,772 cash. The new company, Blossom Sales and Service, has the following transactions during January. 1. Pays $9,000 in advance for 3 months' rent of office, showroom, and repair space. Purchases 43 personal computers at a cost of $1,688 each. 9 graphics computers at a cost of $2,688 each, and 28 printers at a cost of $488 each paying cash upon delivery. Sales, repair, and office employees earn $14,372 in salaries and wages during January, of which $4.772 was still payable at the end of January 4. Sells 33 personal computers at $2,738 each, 7 graphics computers for $3,788 each, and 18 printers for $688 each: $76,772 is received in cash in January, and $52,482 is sold on a deferred payment basis. Other operating expenses of $10,172 are incurred and paid for during January; $3,772 of incurred expenses are payable at January 31 3 5.

Answer 1

Answer:

BLOSSOM SALES AND SERVICE

Income Statement

For the month of January 31,2017

Particulars	(1) Cash Basis (Amount $)	(2) Accrual Basis Amount ($)
Revenues	76,772
($2,738 * 33 + $3,788 * 7 + $688 * 18)
($90,354 + $26,516 + $12,384)		129,254
Expenses:
Cost of computers and printers:
Purchase and paid ($1,688*43)+($2,688*9)+($488*28)	110,440
Cost of goods sold ($1,688*33)+($2,688*8)+($488*18)		85,992
Salaries	9,600	14,372
Rent	9,000	3,000
Other expenses	10,172	13,944
Total expenses	139,212	117,308
Net Income (Loss)	-62,440	11,946

BLOSSOM SALES AND SERVICE

Balance Sheet

January 31, 2017

	(1) Cash Basis (Amount $)	(2) Accrual Basis (Amount $)
Assets:
Cash (Working Note a)	29,332	29,332
Accounts Receivable ($129,254-$76,772)		52,482
Inventory ($110,440-$85,992)		24,448
Prepaid rent ($9,000*2/3)		6,000
Total assets	29,332	112,262
Liabilities and Owner's Equity:
Accounts payable		3,772
Salaries payable		4,772
Owner's equity (Working Note b)	29,332	103,718
Total liabilities and owner's equity	29,332	112,262

Working Notes:

(a)-

Cash Balance as on Jan 31:	Amount ($)
Original investment	91,772
Cash sales	76,772
Cash purchases	-110,440
Rent paid	-9,000
Salaries paid	-9,600
Other expenses	-10,172
Cash Balance as on Jan. 31	29,332

(b)-

Owner's Equity	Cash Basis	Accrual Basis
Initial investment	91,772	91,772
Add: Net Income		11,946
Less: Net Loss	-62,440
Owner's Equity as on Jan 31	29,332	103,718

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