1.

Information on an entity’s accounts is shown below:

Increase in accounts receivable 960,000
Decrease in trade notes receivable 240,000
Collections on trade notes receivable 2,400,000
Recoveries of account previously written-of
(included in collections) 12,000
Collections on accounts receivable 1,200,000
Write-ofs 120,000
Sales returns 24,000

Requirements: Compute for the following:

a. Net sales revenue under the accrual basis of accounting
b. Net sales revenue under the cash basis of accounting

Requirement (a):
Accounts/Trade notes receivable
beg. (0 + 240K) 240,000
Credit sales - gross 4,452,000 1,200,000 Collections on A/R
Recoveries 12,000 2,400,000 Collections on trade N/R
120,000 Write-ofs
24,000 Sales returns
960,000 end. (960K + 0)

Gross credit sales 4,452,000

Sales returns (24,000)
Net sales - accrual 4,428,000

Requirement (b):
Collections on A/R 1,200,000
Collections on trade N/R 2,400,000
Net sales - cash basis 3,600,000

2. Information on an entity’s accounts is shown below:

Increase in accounts payable 1,200,000
Decrease in inventory 300,000
Payments to suppliers 3,000,000
Purchase returns 30,000

Requirements: Compute for the following:

a. Cost of goods sold under the accrual basis of accounting
b. Cost of goods sold under the cash basis of accounting

Accounts payable
- beg.
3,000,00 4,200,00 Net purchases
COGS - cash basis 0 0 (squeeze)

end. 1,200,000

Inventory
beg. 300,000
Net purchases 4,200,000 4,500,00 COGS - accrual basis

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