accounting

posted by .

In its first year of operations Tower Ltd purchased and paid for widgets costing $50,000. During
that year Tower Ltd sold 60 per cent of the widgets. The widgets on hand at the end of the year
cost $20,000. The sales were on credit terms. Tower Ltd received $37,000 in cash from
customers and $3,000 remained uncollected at the end of the year. During the last quarter of the
year of operations Tower Ltd entered into a property insurance contract for losses arising from
fire or theft. The annual premium of $4,000 was paid in cash and the insurance expired nine
months after the end of the reporting period.
Calculate Tower Ltd’s profit for the first year of operations on an accrual basis and on a
cash basis. Explain the difference between the two measures. Which of the two profit
measures is more useful for assessing Tower Ltd’s performance during its first year of
operations? Give reasons for your answer.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Econ

    The demand for widgets (QX) is given by the following equation: QX = 425-PX¡V1.5PW¡V1.25PG+0.8PY+0.1 M where QX= number of units of widgets sold per week PX = the price of widgets = 400 PW = the price of woozles = 50 PG = the price …
  2. algebra

    the acme widget company has $13,000 available for making widgets. part of the money is spent on an advanced widget-bending machine costing $1,000. the manufacturing cost for each widget is $3. how many widgets can be made with the …
  3. accounting

    O'Hara Inc. made sales of $310,000 during 2008, it's first year of operations. Of this, $15,000 remained in accounts receivable at the end of the year. Additionally, the company paid and incurred $270,000 in expenses during the year. …
  4. economics

    Suppose the price of widgets falls from $7 to $5 and consumption of widgets rises from 15 widgets a month to 25 widgets. Calculate your price elasticity of demand of widgets. What can you say about your price elasticity of demand of …
  5. accounting

    During Denton Company’s first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $64 per unit) $ 1,216,000 $ 1,856,000 Cost of goods sold (@ $32 per unit) 608,000 …
  6. Calculus

    A company manufactures widgets. The daily marginal cost to produce x widgets is found to be C'(x) = 0.000009x^2 - 0.009x + 8 (measured in dollars per unit). The daily fixed costs are found to be $120. a. Use this information to get …
  7. econmics

    Suppose the price of widgets rises from $7 to $9 and consumption of widgets falls from 25 widgets a month to 15 widgets. Calculate your price elasticity of demand of widgets. What can you say about your price elasticity of demand of …
  8. Accounting 212

    Wings Inc., a software development firm, has stock outstanding as follows: 25,000 shares of cumulative 1%, preferred stock of $40 par, and 50,000 shares of $120 par common. During its first four years of operations, the following amounts …
  9. Accounting

    During its first year of operations, Maria Rose set up Roseland Inc. and invested $25,000 in the corporation. The company earned $68,000 of revenues and incurred $32,000 of expenses. At the end of the year, the company owed $24,000 …
  10. accounting and finance

    4. Dividends Per Share Scan Tech Inc., a developer of radiology equipment, has stock outstanding as follows: 24,000 shares of 2%preferred stock of $75 par, and 100,000 shares of $8 par common. During its first four years of operations, …

More Similar Questions