Question

In Year 1, Lee Inc. billed its customers $62,000 for services performed. The company collected $51,000 of the amount billed. Lee incurred $39,000 of other operating expenses on account. Lee paid $31,000 of the accounts payable. Lee acquired $40,000 cash from the issue of common stock. The company invested $21,000 cash in the purchase of land. Required (Hint: Identify the six events described in the paragraph and record them in general ledger accounts under an accounting equation before attempting to answer the questions.) Use the preceding information to answer the following questions: What amount of revenue will Lee report on the Year 1 income statement

Answer 1

Answer and Explanation:

LEE INC.

Effect of events on the general ledger accounts

Event        Cash  Account     land     Account   Common stock   Retained

                           receivable             Payable                                 Earnings

Sales  

on account           62,000                                                               62,000

collected     51,000  -51,000

Expenses                                        39,000                                    -39,000

Account

Payable     -31,000                        -31,000

Issue of stock 40,000                                            40,000

Purchase land  -21,000        21,000

Totals         39,000  11,000   21,000   8,000        40,000          23,000

The computation of the amount of revenue recognized would be equivalent to the service performed i.e. $62,000