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Zookie’s Shop, a proprietorship business, conducted the following transactions during the first week in March.
1. Purchased supplies for $1,800. Paid 20% down, remaining 80% to be paid in 10 days.
2. Paid $30 for newspaper advertising to appear this week.
3. Collected $1,400 from customers on account.
4. Performed services for a $1,620 charge to customers; however, cash payment is not due until next week.
5. Paid $600 rent for the month of March.
6. Performed services for $280 cash.
7. Paid part-time sales clerk $40 wages for the week.
8. Wrote a check for $100 to the owner for her personal use.
9. Consumed supplies of $1,400.
a) Compute the net income for the week, using the accrual method of accounting
According to me its a $670 loss,but the answer is a $170 loss.Also when answering this question,the book doesnt consider $1800 to be an expense.I dont understand ,why?,but it does consider $1400 to be supplies expense.Please clear this for me
Service Revenue ($1,620 + 280) -------------------> $1,900------------ A
Less:
Operating Expenses:
Supplies Expense $1,400(Why isn't it $1800)
Advertising Expense $30
Rent Expense $600
Wages Expense $40 Adding(1400+30+40+600)= 2070------------- B
Net Income/(Loss) (Accrual method)------------------------------> ($ 170)------------LOSS
1. Purchased supplies for $1,800. Paid 20% down, remaining 80% to be paid in 10 days.
2. Paid $30 for newspaper advertising to appear this week.
3. Collected $1,400 from customers on account.
4. Performed services for a $1,620 charge to customers; however, cash payment is not due until next week.
5. Paid $600 rent for the month of March.
6. Performed services for $280 cash.
7. Paid part-time sales clerk $40 wages for the week.
8. Wrote a check for $100 to the owner for her personal use.
9. Consumed supplies of $1,400.
a) Compute the net income for the week, using the accrual method of accounting
According to me its a $670 loss,but the answer is a $170 loss.Also when answering this question,the book doesnt consider $1800 to be an expense.I dont understand ,why?,but it does consider $1400 to be supplies expense.Please clear this for me
Service Revenue ($1,620 + 280) -------------------> $1,900------------ A
Less:
Operating Expenses:
Supplies Expense $1,400(Why isn't it $1800)
Advertising Expense $30
Rent Expense $600
Wages Expense $40 Adding(1400+30+40+600)= 2070------------- B
Net Income/(Loss) (Accrual method)------------------------------> ($ 170)------------LOSS
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