CH3Cashversusaccrual -...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 3 Exercises – Cash Versus Accrual Accounting Problem #1 Zookie’s Shop, a proprietorship business, conducted the following transactions during the first week in March. 1. Purchased supplies for $1,800.  Paid 20% down, remaining 80% to be paid in 10 days. 2. Paid $30 for newspaper advertising to appear this week. 3. Collected $1,400 from customers on account. 4. 4. Performed services sat a $1,620 charge to customers; however, cash payment is not due until next  week. 5. Paid $600 rent for the month of March. 6. Performed services for $280 cash. 7. Paid part-time sales clerk $40 wages for the week. 8. Wrote a check for $100 to the owner for her personal use. 9. Consumed supplies of $1,400. a. Compute the net income for the week, using the cash method of accounting. b. Compute the net income for the week, using the accrual method of accounting. Problem #2 Dr. Bob Zimmerman, M.D. maintains the accounting records of the Wellness Center on a cash basis.  During  2007, Dr. Zimmerman collected $305,400 from his patients and paid $91,200 in expenses.  Information  regarding the amount of receivables (accrued revenues), unearned revenues, payables for accrued expenses,  and prepaid expenses is as follows: Balance at 12.31.2007 Balance at 12.31.2008 Accounts Receivable  $45,000 $51,000 Unearned Revenues $2,000 $2,800 Accrued Payables $5,200 $4,980 Prepaid Expenses $3,000 $8,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Prepare a schedule to convert Dr. Zimmerman’s  cash basis income of $214,200 (excess of $305,400 cash  collections over $91,200 cash disbursements) to net income on an accrual basis.
Background image of page 2
Solution: Problem #1 Cash Method: Cash received from Customers ($1,400 + $280) $1,680 Less:  Payment for Supplies ($1,800 x 205) $360            Payment for Advertising $30           Payment for Rent
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/03/2009 for the course ACG 3131 taught by Professor Rotella during the Spring '08 term at University of Central Florida.

Page1 / 5

CH3Cashversusaccrual -...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online