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Cash and Accrual Basis

The following balances have been excerpted from Jimmy’s financial statements:

January 1 December 31
Accounts receivable 200,000.00 250,000.00
Notes Receivable 300,000.00 100,000.00
Cash received from customers 1,120,000.00
Sales returns and allowance 20,000.00
Sales discounts 10,000.00
Merchandise inventory 200,000.00 100,000.00
Accounts Payable 50,000.00 25,000.00
Notes payable 100,000.00 75,000.00
Purchase returns and allowances 40,000.00
Purchase discounts 10,000.00
Payments to suppliers 650,000.00
Accrued rent receivable 70,000.00 40,000.00
Unearned rent income 80,000.00 40,000.00
Collection of rent 480,000.00
Prepaid salaries 100,000.00 125,000.00
Accrued salaries payable 75,000.00 50,000.00

Questions: Determine the following:


1. The gross sales for the year
a. 1,000,000
b. 1,030,000
c. 970,000
d. 1,240,000
2. The net purchases for the year
a. 650,000
b. 600,000
c. 550,000
d. 500,000
3. The gross income for year:
a. 300,000
b. 350,000
c. 270,000
d. 320,000
4. The salaries expense for the year:
a. 400,000
b. 300,000
c. 350,000
d. 450,000
5. The rent income for the year:
a. 470,000
b. 490,000
c. 460,000
d. 500,000

You have been engaged in your second annual examination of the financial statements of Silver
Co. The following data were provided to you by the company accountant:

Cash receipts:
Collection on sale on account 740,000.00
Cash sales 100,000.00
Proceeds of a note payable dated October 1,
2018 and due October 1, 2020, discounted at
18% 300,000.00

Cash disbursements:
Purchase of land and building on April 1, 2018 400,000.00
Full payment of furniture and fixtures
purchased on July 1, 2018 ?
On accounts payable and administrative
expenses 518,000.00
Selling expenses 200,000.00
Of the sales on account P 10,000 was returned because of poor quality and there was a
purchase return of P 8,000.

The following data are also available:

12/31/2018 12/31/2017
Accounts Receivable 200000 150,000.00
Merchandise Inventory 220000 190,000.00
Accounts Payable 180000 230,000.00
Accrued Rent Expense 40000 30,000.00

Of the total purchase price of the land and building, 40% is allocated to land. Annual
depreciation is 5% on the building and 10% on the furniture and fixtures.

Selling expenses of P 200,000 are 40% of gross profit. The depreciation expenses are to be part
of the administrative expense amount. Depreciation expense is 20% of the total administrative
expenses. There are no unpaid selling and administrative expenses as of December 31.

Questions: Based on the above data and your audit, determine the balance of the following as
of December 31, 2018:
1. Gross sales on account
a. 800,000
b. 890,000
c. 900,000
d. 790,000
2. Net purchases
a. 420,000
b. 428,000
c. 528,000
d. 520,000
3. Payment of accounts payable
a. 462,000
b. 470,000
c. 478,000
d. 486,000
4. Payment of administrative expenses
a. 48,000
b. 60,000
c. 56,000
d. 40,000
5. Total selling and administrative expenses
a. 718,000
b. 710,000
c. 260,000
d. 248,000
6. Cost of furniture and fixtures
a. 60,000
b. 30,000
c. 120,000
d. 240,000