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levacccp [35]
3 years ago
15

Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of 2020, her accountant co

mputes her accrual basis income that is used on her tax return. For 2020, Selma had cash receipts of $1,400,000, which included $200,000 collected on accounts receivable from 2019 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2020, she had $250,000 in accounts receivable from customers, all from 2020 sales.
Required:
a. Compute Selma's accrual basis gross receipts for 2020.
b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2014 was $1.3 million. At the end of 2019, she had merchandise on hand with a cost of $150,000. At the end of 2015, the cost of merchandise on hand was $300,000. Compute Selma's gross income from merchandise sales for 2020.
Business
1 answer:
Murljashka [212]3 years ago
7 0

Answer:

A. Gross receipts $1,350,000

B. Gross income $200,000

Explanation:

a. Computation accrual basis gross receipts .

Cash received$1,400,000

Less: Beginning accounts receivable(200,000)

Less: Bank loan(100,000)

Add: Ending accounts receivable250,000

Gross receipts $1,350,000

Therefore Selma's accrual basis gross receipts for 2020 will be $1,350,000

b.Computation for gross income

Gross receipts $1,350,000

Cost of goods sold:

Purchases $1,300,000

Beginning inventory 150,000

Less: Ending inventory(300,000) (1,150,000)

Gross income $200,000

($1,350,000-(1,150,000)

Therefore Selma's gross income from merchandise sales for 2020 will be $200,000

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