Question

Problem 3-11 On January 1, 2017, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing $91,468 cash. The new company, Oriole Sales and Service, has the following transactions during January. 1. Pays $12,000 in advance for 3 months’ rent of office, showroom, and repair space. 2. Purchases 44 personal computers at a cost of $1,672 each, 10 graphics computers at a cost of $2,672 each, and 29 printers at a cost of $472 each, paying cash upon delivery. 3. Sales, repair, and office employees earn $14,068 in salaries and wages during January, of which $4,468 was still payable at the end of January. 4. Sells 34 personal computers at $2,722 each, 8 graphics computers for $3,772 each, and 19 printers for $672 each; $76,468 is received in cash in January, and $59,024 is sold on a deferred payment basis. 5. Other operating expenses of $9,868 are incurred and paid for during January; $3,468 of incurred expenses are payable at January 31. Using the transaction data above, prepare (1) a cash-basis income statement and (2) an accrual-basis income statement for the month of January. (Enter loss using either a negative sign preceding the number, e.g. -45 or parentheses e.g. (45).) ORIOLE SALES AND SERVICE Income Statement (1) Cash Basis (2) Accrual Basis $ $ $ $ Using the transaction data above, prepare (1) a cash-basis balance sheet and (2) an accrual-basis balance sheet as of January 31, 2017. (List assets in order of liquidity.) ORIOLE SALES AND SERVICE Balance Sheet (1) Cash Basis (2) Accrual Basis Assets $ $ $ $ Liabilities and Owners’ Equity $ $ $ $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Ans-1- Using the transaction data above preparing (1) a cash basis income statements and (2) an accrual basis income statement for the month of January:-

ORIOLE SALES AND SERVICE'

Income Statement

For the month of January 31,2017

Particulars	(1) Cash Basis (Amount $)	(2) Accrual Basis Amount ($)
Revenues	76,468
($2,722*34+$3,772*8+$672*19)
($92,548+$30,176+$12,768)		135,492
Expenses:
Cost of computers and printers:
Purchase and paid ($1,672*44)+($2,672*10)+($472*29)	113,976
Cost of goods sold ($1,672*34)+($2,672*8)+($472*19)		87,192
Salaries	9,600	14,068
Rent	12,000	4,000
Other expenses	9,868	13,336
Total expenses	145,444	118,596
Net Income (Loss)	-68,976	16,896

2- Using the transaction data, prepare (1) a cash basis balance sheet and (2) an accrual basis balance sheet as of January 31,2017:-

ORIOLE SALES AND SERVICE

Balance Sheet

January 31, 2017

	(1) Cash Basis (Amount $)	(2) Accrual Basis (Amount $)
Assets:
Cash (Working Note a)	22,492	22,492
Accounts Receivable ($135,492-$76,468)		59,024
Inventory ($113,976-$87,192)		26,784
Prepaid rent ($12,000*2/3)		8,000
Total assets	22,492	116,300
Liabilities and Owner's Equity:
Accounts payable		3,468
Salaries payable		4,468
Owner's equity (Working Note b)	22,492	108,364
Total liabilities and owner's equity	22,492	116,300

Working Notes:

(a)-

Cash Balance as on Jan 31:	Amount ($)
Original investment	91,468
Cash sales	76,468
Cash purchases	-113,976
Rent paid	-12,000
Salaries paid	-9,600
Other expenses	-9,868
Cash Balance as on Jan. 31	22,492

(b)-

Owner's Equity	Cash Basis	Accrual Basis
Initial investment	91,468	91,468
Add: Net Income		16,896
Less: Net Loss	-68,976
Owner's Equity as on Jan 31	22,492	108,364

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