Selma operates a contractor s supply store She maintains her books
Selma operates a contractor's 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 2014, Selma had cash receipts of $1.4 million, which included $200,000 collected on accounts receivable from 2013 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2014, she had $250,000 in accounts receivable from customers, all from 2014 sales.
a. Compute Selma's accrual basis gross receipts for 2014.
b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2014 was $1.3 million. At the end of 2013, she had merchandise on hand with a cost of $150,000. At the end of 2014, the cost of merchandise on hand was $300,000.
Compute Selma's gross income from merchandise sales for 2014.
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