Cash versus accrual accounting
Response to the following problem:
Selected balance sheet information for the Wolf Company at November 30, and December 31, 2016, is presented below. The company uses the perpetual inventory system and all sales to customers are made on credit.
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Nov. 30
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Dec. 31
|
|
|
Dr.
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Cr.
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Dr.
|
Cr.
|
|
Accounts receivable
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10,000
|
|
3,000
|
|
|
Prepaid insurance
|
5,000
|
|
7,500
|
|
|
Inventory
|
7,000
|
|
6,000
|
|
|
Accounts payable
|
|
12,000
|
|
15,000
|
|
Salaries and wages payable
|
|
5,000
|
|
3,000
|
The following cash flow information also is available:
a. Cash collected from credit customers, $80,000.
b. Cash paid for insurance, $5,000.
c. Cash paid to suppliers of inventory, $60,000 (the entire accounts payable amounts relate to inventory purchases).
d. Cash paid to employees for salaries and wages, $10,000
Required:
1. Determine the following for the month of December:
a. Sales revenue.
b. Cost of goods sold.
c. Insurance expense.
d. Salaries and wages expense.
2. Prepare summary journal entries to record the month's sales and cost of those sales.