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marishachu [46]
3 years ago
5

On March 31, 2015, Cars, Inc. owes Preston Devices, one of its suppliers, $25,000 for previous purchases. During April 2015, Pre

ston sells Cars devices with a sales price of $10,000 and a cost to Preston of $8,000. During April, Cars pays Preston $12,000 against the amount owed to Preston. What is the effect of these April transactions on Preston's balance sheet?
Business
1 answer:
andrew11 [14]3 years ago
5 0

Answer:

March 31, outstanding debt $25,000

During April $10,000 more merchandise is sold to Cars inc. (COGS $8,000)

Cars paid $12,000 to Preston to lower its accounts payable

On March 31, Preston's balance sheet showed an accounts receivable of $25,000.

On April 30, the accounts receivable balance is $23,000, the cash balance increased by $12,000 and retained earnings should increase by $2,000.

The income statement should show an increases in sales revenue of $10,000 - $8,000 COGS = $2,000 profit (which increases retained earnings).

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