Question

QUESTION:

The sale of inventory increases the inventory balance using accrual-basis accounting.

o True

o False

1. Use the template below to indicate how the following transactions affect the accrual-basis accounting equation: a. Kissimmee, Inc. (a retail store) begins business on January 1, 2015 with a $100,000 cash contribution from the owners. b. On January 1, 2015, Kissimmee hires ſive employees to manage and operate the business. c. On January 1, 2015, Kissimmee prepays the monthly rent of $500 cash. d. On January 27, 2015, Kissimmee issues a 12% note payable to purchase warehouse equipment for $10,000, e. On January 10, 2015, Kissimmee purchases goods from a wholesaler for $2,500 cash, and sells the goods on the same day $4,500 cash. f. On January 15, 2015, Kissimmee pays wages due employees in the amount of $750 cash. g. On January 20, 2015, Kissimmee pays various utility expenses in the amount of $400 cash. h. On January 25, 2015, Kissimmee purchases goods on credit from a wholesaler in the amount of $1,000. a customer for Transaction rcfcrcncc Assets Prepaid Inventory Rent Liabilities Accounts Notcs Pavable Payable Shareholders' Equity Contributed Capital Revenlic (+) Expenses (-) Cash PP&E $100.000 $100,000 a b $4500) $500 $10.000 $10.000 $4,500 d d cil) 012) f $4.500 $(2.500) $(750) $(400) $2.500 $750 $400 4 h $1.000 $1.000 Totals $100.350 $1.000 $500 $10,000 = $1.000) $10.000 $100.000 $4,500 $3,650

Answer 1

Transaction Reference	Cash	Inventory	Prepaid Rent	PPE	=	Account Payable	Note Payable	Contribution capital	Revenue	Expense
a	1,00,000.00							1,00,000.00
b	-500.00		500.00
c				10,000.00			10,000.00
e(1)	-2,500.00	2,500.00
e(2)	4,500.00	-2,500.00							4,500.00	-2,500.00
f	-750.00									-750.00
g	-400.00									-400.00
h		1,000.00				1,000.00
Total	1,00,350.00	1,000.00	500.00	10,000.00		1,000.00	10,000.00	1,00,000.00	4,500.00	-3,650.00

Answer :

False

Reason:

Inventory level increase when you purchase but not when sale inventory.Sale inventory reduce the level the inventory