We just starting the chapters in accounting in school. We have about 10 problems to do. I will post one problem here and i need someone to show me how exactly they got it, so i understand and it could help me work on the other 9.
here it is-
The comparative Balance Sheets of Savoy Company reported the following selected end-of-year balances:
12/31/2009
Assets: Office Supplies inventory- $3,000
liabilities: Unearned Rent Revenue- $9,000
12/31/2010
Assets: Office Supplies inventory- $2,000
liabilities: Unearned Rent Revenue- $7,000
The 2010 Income Statement reported the following amounts:
For the Year Ended 12/31/2010
Revenues: Rent Revenue- $18,000
Expenses: Office supplies expenses- $6,000
a. The total amount of office supplies that were purchases during 2010 was: $____________
b. The total amount of cash that was collected from tenanats during 2010 was: $_____________
I would really appreciate if someone can take the time out and just briefly explain how they get the answers to this. So i can do the rest of the 9. they are all very similar.
To find the answers to these questions, we need to analyze the changes in the balances from 2009 to 2010 and consider relevant information from the income statement.
a. Office supplies purchased during 2010:
To calculate this, we need to determine the change in office supplies inventory from 2009 to 2010. In 2009, the office supplies inventory was $3,000, and in 2010, it decreased to $2,000. To find the office supplies purchased, we subtract the ending balance from the beginning balance.
Office supplies purchased during 2010 = Beginning balance - Ending balance
Office supplies purchased during 2010 = $3,000 - $2,000
Office supplies purchased during 2010 = $1,000
Therefore, the total amount of office supplies purchased during 2010 is $1,000.
b. Cash collected from tenants during 2010:
To determine this, we need to consider the revenues and expenses related to rent. The income statement reports that the Rent Revenue for the year ending 12/31/2010 was $18,000. However, this amount includes both rent collected in cash and unearned rent revenue.
To separate the two, we need to look at the changes in unearned rent revenue from 2009 to 2010. In 2009, the unearned rent revenue was $9,000, and in 2010, it decreased to $7,000. This decrease means that $2,000 of the unearned rent revenue was recognized as revenue during 2010.
To find the cash collected from tenants, we subtract the amount recognized as revenue from the total rent revenue.
Cash collected from tenants during 2010 = Rent revenue - Revenue recognized from unearned rent revenue
Cash collected from tenants during 2010 = $18,000 - $2,000
Cash collected from tenants during 2010 = $16,000
Therefore, the total amount of cash collected from tenants during 2010 is $16,000.