Comparing Income with Cash Flow (A Challenging Problem) (Pl-3)
Choice Chicken Company was organized on January 1. 2011. At the end of the first quarter (three months) of operations, the owner prepared a summary of its activities as shown in the first row of the following tabulation:
| Computation of | |
Summary of Transactions | Income | Cash |
a. Services performed for customers. $85,000. of which 515,000 remained uncollected at the end of the quarter. | + 585.000 | +S70.000 |
b. Cash borrowed from the local bank. $25,000 (one-year note). |
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c. Small service truck purchased at the end of the quarter to be used in the business for two years starting the next quarter: cost, S8.000 cash. |
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d. Wages earned by employees, 536.000. of which one-sixth remained unpaid at the end of the quarter. |
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e. Service supplies purchased for use in the business, S4.000 cash, of which 51,000 were unused (still on hand) at the end of the quarter. |
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f. Other operating expenses, S31,000, of which one-half remained unpaid at the end of the quarter. |
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Based only on these transactions, compute the following for the quarter: Income (or loss) Cash inflow (or outflow) |
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Required:
1. For each of the six transactions given in this tabulation, enter what you consider the correct amounts. Enter a zero when appropriate. The first transaction is illustrated.
2. For each transaction, explain the basis for your dollar responses.
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