Howdy Company keeps its accounting records on a cash basis during the year. At year-end, it adjusts its books to the accrual basis for preparing its financial statements. At the end of 2011, Howdy Company reported the following balance sheet items:

It is now the end of 2012. The company’s checkbook shows cash receipts from customers of $87,000 and cash payments of $77,400. An examination of the cash payments revealed the following:

$43,200 was paid to suppliers for inventory

$30,000 was paid for operating costs

$4,200 was paid on January 1, 2012 for a two-year insurance policy

On December 31, 2012, the following other information was available:

Customers owed Howdy $18,500

Howdy owed suppliers $16,500

Howdy owed their employees $900

Howdy owed their customers $6,000 in services.

Howdy’s ending inventory balance was $15,400.

Additionally, Howdy is depreciating their equipment using straight-line depreciation over a 10-year life (no salvage value).

Required:

Using accrual-based accounting, answer the following. Note that you are not required to consider the tax impact of these transactions.

a. Revenues for 2012:

b. Cost of Goods Sold for 2012:

c. Operating costs for 2012:

Transcribed Image Text:

Debit Credit S 14,500 Cash Accounts Receivable 12,000 Inventory 14,800 Equipment 30,000 $ 9,000 Accumulated Depreciation Accounts Payable 12,100 Uneamed Revenue 3,000 Common Stock 50,200