Comparing Income with Cash Flow (A Challenging Problem)

Choice Chicken Company was organized on January 1, 2011. At the end of the first quarter (three months) of operations, the owner prepared a summary of its activities as shown in the first row of the following tabulation:

Required:
1. For each of the six transactions given in this tabulation, enter what you consider the correct amounts. Enter a zero when appropriate. The first transaction is illustrated.
2. For each transaction, explain the basis for your dollarresponses.

Computation of Summary of Transactions Income Cash a. Services performed for customers, $85,000, of which $15,000 remained uncollected at the end of the quarter. +$85,000 +$70,000 b. Cash borrowed from the local bank, $25,000 (one-year note). c. Small service truck purchased at the end of the quarter to be used in the business for two years starting the next quarter: cost, $8,000 cash. d. Wages earned by employees, $36,000, of which one-sixth remained unpaid at the end of the quarter. e. Service supplies purchased for use in the business, $4,000 cash, of which $1,000 were unused (still on hand) at the end of the quarter. f. Other operating expenses, $31,000, of which one-half remained unpaid at the end of the quarter. Based only on these transactions, compute the following for the quarter: Income (or loss) Cash inflow (or outflow)