Identify how these events would affect the Financial Statements at 31 December 2010.
Example: The Company paid wages for the month of December 2010 of $10,000
Answer:
Balance Sheet:
Decrease in Cash $10,000
Decrease in Equity $10,000.
Income Statement:
Wages expense: $10,000
Cash Flow statement:
Operating Cash outflow: $10,000
a. Inventory was purchased on credit for $15,000. The $10,000 worth of this inventory was sold on credit for $20,000 by December 31 2010..
b. Insurance of $24,000 was paid on 31 August 09. Note: remember the balance sheet date!.
c. Property was purchased at the beginning of the year for 250,000. The asset is depreciated at annual rate of $20,000..
d. A company is buys 2,000 items of clothing for $5 each. It on sells 1,500 of them for $12 each. Of those sold 1,000 have been paid while the rest are still payable. The company has paid its supplier for half of the clothing, the rest is still owing. .
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