Royal Sales experienced the following events during 2013, its first year of operation: 1. Started the business

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Royal Sales experienced the following events during 2013, its first year of operation:
1. Started the business when it acquired $80,000 cash from the issue of common stock.
2. Paid $35,000 cash to purchase inventory.
3. Sold inventory costing $21,000 for $40,500 cash.
4. Physically counted inventory showing $13,500 inventory was on hand at the end of the accounting period.

Required
a. Open appropriate ledger T-accounts, and record the events in the accounts.
b. Prepare an income statement and balance sheet for 2013.
c. Explain how differences between the book balance and the physical count of inventory could arise. Why is being able to determine whether differences exist useful to management?

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...
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Related Book For  book-img-for-question

Fundamental financial accounting concepts

ISBN: 978-0078025365

8th edition

Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward

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