R. J. Sen Corporation was formed on June 1, 20X0,

R. J. Sen Corporation was formed on June 1, 20X0, when some stockholders invested $100,000 in cash in the company. During the first week of June, the company spent $85,000 cash for merchandise inventory (sportswear). During the remainder of the month, total sales reached $115,000, of which $70,000 was on open account. The cost of the inventory sold was $60,000.

For simplicity, assume that no other transactions occurred except that on June 28, R. J. Sen Corporation acquired $34,000 additional inventory on open account.

1. By using the balance sheet equation approach demonstrated in Exhibit 2-3 (p. 49), analyze all transactions for June. Show all amounts in thousands.

2. Prepare a balance sheet for June 30, 20X0.

3. Prepare two statements for June, side by side. The first should use the accrual basis of accounting to compute net income, and the second, the cash basis to compute the difference between cash inflows and cash outflows. Which basis provides a more informative measure of economic performance? Why?


Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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