Complete the Income Statement on Cash and Accrual Basis |

School: Universiteit Utrecht - Course: ECONOMICS EC2PCF - Subject: Accounting

IFA homework week 5 Question 1 Endor Pillow Company sells specialty pillows and accessories to customers. Its fiscal year ends on December 31. The following transactions occurred in the current year: •Purchased $250,000 of new pillow inventory; paid $90,000 in cash and owed the rest on account. •Paid employees $180,300 in wages for work during the year; an additional $3,700 for the current year's wages will be paid in January of the next year. •Sold pillows to customers for $750,000; received $500,000 in cash and customers owed the rest on account. The cost of the pillow inventory to Endor Pillow was $485,000. •Paid $17,200 cash for utilities for the year. •Received $70,000 from customers as deposits on orders of new pillows to be sold to the customers in January of the next year. •Received a $1,930 utilities bill for December of the current year that will be paid in January of the next year. I.Complete the Income statement both on cash basis and on accrual basis. Use the following: II.Which basis of accounting (cash or accrual) provides more useful information to investors, creditors, and other users? Accrual accounting provides more useful information since it better reflects the actual revenues and expenses which leads to a more transparent view of the company's finances.

Question 2 Coruscant Inc. started its electronic commerce business in 1995 and expanded rapidly. The following transactions occurred during a recent year (dollars in millions): a.Issued stock for $623 cash. b.Purchased equipment costing $6,320, paying $4,893 in cash and charging the rest on account. c.Paid $5,000 in principal and $300 in interest expense on long-term debt. d.Earned $177,866 in sales revenue; collected $123,949 in cash with the customers owing the rest on their Coruscant credit card account. e.Incurred $25,249 in shipping expenses, all on credit. f.Paid $118,241 cash on accounts owed to suppliers. g.Incurred $10,069 in marketing expenses; paid cash. h.Collected $38,200 in cash from customers paying on their Coruscant credit card account. i.Borrowed $16,231 in cash as long-term debt. j.Used inventory costing $111,934 when sold to customers. k.Paid $830 in income tax recorded as an expense in the prior year.