Computation of Revenue, COGS and Operating Cost

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Howdy Company keeps its accounting records on a cash basis during the year.  At year-end, it adjusts its books to the accrual basis for preparing its financial statements.  At the end of 2011, Howdy Company reported the following balance sheet items:

                                                                    Debit                         Credit                               

Cash                                                     $  14,500                                   

Accounts Receivable                            12,000

Inventory                                                14,800

Equipment                                              30,000

Accumulated Depreciation                                                   $  9,000

Accounts Payable                                                                      12,100

Unearned Revenue                                                                     3,000               

Common Stock                                                                           50,200

 

It is now the end of 2012.  The company’s checkbook shows cash receipts from customers of $87,000 and cash payments of $77,400.  An examination of the cash payments revealed the following:

1)       $43,200 was paid to suppliers for inventory

2)       $30,000 was paid for operating costs

3)       $4,200  was paid on January 1, 2012 for a two-year insurance policy

 

On December 31, 2012, the following other information was available:

1)       Customers owed Howdy $18,500

2)       Howdy owed suppliers $16,500

3)       Howdy owed their employees $900

4)       Howdy owed their customers $6,000 in services. 

5)       Howdy’s ending inventory balance was $15,400. 

 

Additionally, Howdy is depreciating their equipment using straight-line depreciation over a 10-year life (no salvage value).

 

Required:  Using accrual-based accounting, answer the following.  Note that you are not required to consider the tax impact of these transactions.

 

a.        Revenues for 2012:                                                                                        $  _______

 

 

 

b.       Cost of Goods Sold for 2012:                                                                        $  _______

 

 

 

c.        Operating costs for 2012:                                                                           $  ________

 

    • 12 years ago
    Computation of Revenue, COGS and Operating Cost
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