Cintu is a large marketer and distributor of food service products serving restaurants, hotels, schools, hospitals, and other institutions. The following transactions are typical of those that occurred in a recent year, but the amounts are simplified.
Borrowed $125,500 from a bank, signing a short-term note payable.
Provided $111,600 in service to customers, with $104,800 on account and the rest received in cash.
Purchased equipment for $145,000 in cash.
Incurred and paid employee wages of $1,300.
Received $415 on account from a customer.
Incurred and paid $4,150 cash for travel costs during the year.
Paid $9,850 cash on accounts payable.
Incurred $25,100 in utility expenses during the year, of which $19,700 was paid in cash and the rest owed on account.
For each of the above transactions, prepare accrual basis journal entries.
Calculate the company's preliminary net income.
Accrual Journal Entry And Income Statement
An Accrual Journal Entry is a journal entry which is used to record revenues and expenses incurred during a particular financial period irrespective of whether cash is received or paid. In this way, there is less manipulation of profits and income statements produced are thus useful for decision making.
Answer and Explanation:
1. Journal Entry for Bank Borrowings
|Cr||Short term notes Payable||125500|
2. Journal Entry for sales made to customers on account as well as in cash
|Cr||Sales/Consulting Services provided||111600|
3. Journal Entry for Purchase of Equipment with cash.
4. Journal Entry for wages paid in cash.
5. Journal Entry for money received from Debtors.
6.Journal Entry for travel expenses incurred during the year
7.Journal Entry for payment of Accounts payable.
8. Journal Entry for Utility Expenses paid partly in cash and rest on account.
Preliminary Income Statement
|Less: Wages Paid||1300|
|Less: Travel Expense||4150|
Learn more about this topic:
from Accounting 201: Intermediate Accounting IChapter 5 / Lesson 6