Question

Ruby operates a hobby supply store. She maintains her books using the cash method. At the end of the year, her accountant computes her accrual basis income that is used on her tax return.

For 2020, Ruby had cash receipts of $840,000, which included $100,000 collected on accounts receivable from 2019 sales. It also included the proceeds of a $50,000 bank loan. At the end of 2020, she had $175,000 in accounts receivable from customers, all from 2020 sales. Ruby paid cash for all of the purchases. The total amount she paid for merchandise in 2020 was $560,000. At the end of 2019, she had merchandise on hand with a cost of $45,000. At the end of 2020, the cost of merchandise on hand was $80,000.

1. Ruby's accrual basis gross receipts for 2020 are_______ $ .

2. The cost of goods sold for 2020 under the accrual method is________ $ .

3. The gross profit from merchandise sales for 2020 under the accrual basis is________ $ .

Answer 1

Ruby

1. Ruby's accrual basis gross receipts for 2020 are_______ $740,000.

2. The cost of goods sold for 2020 under the accrual method is________ $525,000.

3. The gross profit from merchandise sales for 2020 under the accrual basis is________ $340,000.

Step-by-step explanation:

a) Data and Calculations:

2020 Cash receipts = $840,000

2019 accounts receivable (100,000)

Bank loan (50,000)

Receipts from customers $690,000

Bank loan 50,000

Gross receipts $740,000

Receipts from customers $690,000

plus accounts receivable 175,000

Total sales for 2020 $865,000

Beginning inventory (2019) = $45,000

Amount paid for purchases = $560,000

Ending inventory (2020) = $80,000

Cost of goods sold = $525,000

Total sales for 2020 $865,000

Cost of goods sold 525,000

Gross profit = $340,000