Computation of Revenue, COGS and Operating Cost
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
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