Chapter 08 - Purchasing/Human Resources/Payment Process: Recording and Evaluating Expenditure Process Activities
Chapter 8: Purchasing/Human Resources/Payment Process: Recording and Evaluating Expenditure Process Activities
QUESTIONS
1.A special journal is a journal used for frequent, recurring transactions. A special journal is used in conjunction with the general journal, that is, a given accounting event is recorded in either a special journal or the general journal.
2.A subsidiary ledger is a place to record details concerning a specific general ledger account. A subsidiary ledger is used to supplement a general ledger account. That is, amounts are recorded twice—details in the subsidiary ledger and totals in the general ledger.
3.Companies use a perpetual inventory system to keep a running balance of the cost of inventory available for sale and cost of goods sold. Companies use a periodic inventory system to determine the cost of goods sold and ending inventory only at specific points in time.
4.Purchases is used to record the cost of all inventory purchased. Purchase Discounts is used to record the cost of all purchase discounts taken. Purchase Returns and Allowances is used to record the cost of all inventory returned or allowances given by suppliers of inventory.
5.Direct Materials Inventory is inventory purchased to be used in production. Merchandise Inventory is inventory purchased to be sold.
6.Companies use the gross price method to record inventory at its gross amount and to record discounts only when taken. Companies use the net price method to record inventory at its net amount and to record discounts lost.
7.A discount taken is the difference between the gross price of the merchandise and the cash that must be paid since the merchandise is paid for within the discount period. A discount lost is the difference between the net price of the merchandise and the cash that must be paid since the merchandise is paid for after the discount period has expired.
8. A loss is a decrease in net assets that does not result from the attempt to generate revenue. An expense is a decrease in net assets resulting from the attempt to generate revenue.
9.Salary and Wage Expense reflects the employees’ gross pay because that is the amount earned by employees. From the business’s point of view then, gross pay represents the cost incurred in an attempt to generate revenue.
10.Both, the employer pays FICA taxes and also withholds FICA taxes from the employee. Thus, FICA is often referred to as a matching expense.
11.Prepaid rent is an asset while rent expense is the amount of rent used up in an attempt to generate revenue.
12.Supplies is an asset while supplies expense is the amount of supplies used up in an attempt to generate revenue.
13.Accumulated Depreciation is a contra account that represents the total amount of the cost of an asset that has been expensed in an attempt to generate revenue.
14.Utilities expense represents the cost of utilities used in an attempt to generate revenue. Utilities payable represents the obligation to pay for the cost of utilities that are owed.
15.Insurance expense of $12,000 is shown on the income statement. The ending balance in the Prepaid Insurance account of $1,000 ($5,000 + $8,000 - $12,000) is shown on the Balance Sheet. The cash paid for insurance ($8,000) is shown on the Statement of Cash Flows.
16.If Inventory increases it implies that more inventory was purchased than was sold during the period. Therefore cost of goods sold is less than net purchases.
17.If Accounts Payable—Inventory decreases it implies that more was paid than was charged during the period. Therefore net purchases were less than cash payments.
18.It depends on the information needed. If the company needs a running balance of inventory, the perpetual system should be adopted.
19.It depends on the information needed and the philosophy adopted by management. If management believes that all discounts should be taken, the net price method should be used because it indicates discounts lost.
20.The company should compare its plans against its actual results to determine if goals have been achieved.
EXERCISES
E8.1Jan 14Utilities payable 2,200
Cash 2,200
Mar 15Office supplies 5,000
Accounts payable 5,000
Apr 1Accounts payable 5,000
Cash 5,000
Jun 1Prepaid insurance 6,400
Cash 6,400
Dec 31Utilities expense 3,600
Utilities payable 3,600
Supplies expense 5,280
Office supplies 5,280
($2,780 + $5,000 - $2,500)
Insurance expense 5,200
Prepaid insurance 5,200
($2,000 + $6,400 * 6/12)
E8.2Salary and wage expense 2,025.00
FIT withheld 393.40
FICA taxes withheld 154.91
Retirement withheld 194.00
Cash1,282.90
Payroll tax expense 280.46
FICA taxes payable 154.91
SUTA taxes payable ($2,025 * 0.054) 109.35
FUTA taxes payable ($2,025 * 0.008) 16.20
E8.3Payroll tax expense36,010
FICA taxes payable 19,890
SUTA taxes payable 14,040
FUTA taxes payable2,080
E8.4Case 1: $54,000 + $72,000 = $126,000; $126,000 - $41,000 = $85,000.
Case 2: $172,000 + $13,000 = $185,000; $185,000 - $37,000 = $148,000.
Case 3: $88,000 + $26,000 = $114,000; $114,000 - $67,000 = $47,000.
E8.5Company A: $667,800 + $4,776,200 = $5,444,000; $5,444,000 - $819,900 = $4,624,100.
Company B: $2,940,700 - $388,200 = $2,552,500; $2,940,700 - $1,457,900 = $1,482,800.
Company C: $534,800 + $163,900 = $698,700; $698,700 - $647,600 = $51,100.
E8.6Direct materials inventory26,264
Accounts payable26,264
Accounts payable 1,568
Direct materials inventory 1,568
Accounts payable24,696
Cash24,696
E8.7Direct materials inventory26,800
Accounts payable26,800
Accounts payable 1,600
Direct materials inventory 1,600
Accounts payable25,200
Direct materials inventory 504
Cash24,696
E8.8Purchases26,264
Accounts payable26,264
Accounts payable 1,568
Purchases returns & allowances 1,568
Accounts payable24,696
Cash24,696
E8.9Purchases26,800
Accounts payable26,800
Accounts payable 1,600
Purchases returns & allowances 1,600
Accounts payable25,200
Purchases discounts 504
Cash24,696
E8.10Day 8: assets increase; liabilities increase
Day 12: liabilities decrease; assets decrease
Day 16: liabilities decrease; assets decrease
E8.11Purchases15,100
Accounts payable15,100
Freight on purchases 250
Cash 250
Accounts payable 1,400
Purchase returns & allowances 1,400
Accounts payable 13,700
Cash13,700
E8.12Direct materials inventory15,100
Accounts payable15,100
Direct materials inventory 250
Cash 250
Accounts payable 1,400
Direct materials inventory 1,400
Accounts payable13,700
Cash13,700
E8.13Purchases14,949
Accounts payable14,949
Freight on purchases 250
Cash 250
Accounts payable 1,386
Purchase returns & allowances 1,386
Accounts payable13,563
Discounts lost 137
Cash 13,700
E8.14Direct materials inventory14,949
Accounts payable14,949
Direct materials inventory 250
Cash 250
Accounts payable 1,386
Direct materials inventory 1,386
Accounts payable13,563
Discounts lost 137
Cash13,700
E8.15Accounts payable105,840
Cash105,840
Accounts payable 54,450
Cash 54,450
Accounts payable140,580
Cash140,580
E8.16Accounts payable105,840
Discounts lost 2,160
Cash108,000
Accounts payable 54,450
Discounts lost 550
Cash 55,000
Accounts payable140,580
Discounts lost 1,420
Cash142,000
E8.17Accounts payable108,000
Inventory 2,160
Cash105,840
Accounts payable 55,000
Inventory 550
Cash 54,450
Accounts payable142,000
Inventory 1,420
Cash140,580
E8.18Accounts payable108,000
Cash108,000
Accounts payable 55,000
Cash 55,000
Accounts payable142,000
Cash142,000
E8.19Inventory: $145,000 + $685,000 = $830,000; $830,000 - $130,000 = $700,000 Inventory purchases on account
Accounts payable: $109,000 + $700,000 = $809,000; $809,000 - $120,000 = $689,000 Cash paid for inventory
E8.20Prepaid insurance: $5,600 + $15,475 = $21,075; $21,075 - $14,500 = $6,575
Office supplies: $8,465 + $8,947 = $17,412; $17,412 - $6,450 = $10,962
Wages: $23,000 + $158,570 = $181,570; $181,570 - $19,553 = $162,017
E8.21$60,000 + $630,000 = $690,000; $690,000 - $70,000 = $620,000
PROBLEMS
P8.1
a.1Prepaid rent5,000
Cash5,000
2Advertising expense 950
Cash 950
5Office supplies 300
Accounts payable 300
15Prepaid insurance 700
Cash 700
21Utility expense 240
Utilities payable 240
26Postage expense 365
Cash 365
30Utilities payable 240
Cash 240
31Supplies expense2,150
Office supplies2,150
31Rent expense1,250
Prepaid rent1,250
31Insurance expense 58.33
Prepaid insurance 58.33
($700/6 * ½)
b.
Income Statement
Advertising expense$ 950
Utility expense 240
Postage expense 365
Supplies expense 2,150
Rent expense 1,250
Insurance expense 58
Total expenses$5,013
Balance Sheet:
Prepaid rent$3,750
Office supplies 1,250
Prepaid insurance 642
Total current assets$5,642
Accounts payable$ 300
Statement of Cash Flows: Operating
Cash paid for rent$(5,000)
Cash paid for advertising (950)
Cash paid for postage (365)
Cash paid for insurance (700)
Cash paid for utilities (240)
Total cash outflow from operating$(7,255)
P8.2
a.Office salaries expense 56,000
Sales salaries expense128,000
Warehouse salaries expense112,000
FIT payable 62,000
FICA taxes payable 22,644
SIT payable 6,820
Health insurance payable 5,100
Pension contributionspayable 13,200
Salaries payable186,236
b.Payroll tax expense 40,996
FICA taxes payable 22,644
SUTA taxes payable 15,984
FUTA taxes payable 2,368
P8.3
a.3Inventory88,396
Accounts payable88,396
11Inventory 350
Cash 350
15Inventory64,092
Accounts payable64,092
20Accounts payable 7,840
Inventory 7,840
25Accounts payable56,252
Cash56,252
28Accounts payable88,396
Discounts lost 1,804
Cash90,200
b.3Inventory90,200
Accounts payable90,200
11Inventory 350
Cash 350
15Inventory65,400
Accounts payable65,400
20Accounts payable 8,000
Inventory 8,000
25Accounts payable57,400
Inventory 1,148
Cash56,252
28Accounts payable90,200
Cash90,200
c.3Purchases88,396
Accounts payable88,396
11Freight on purchases 350
Cash 350
15Purchases64,092
Accounts payable64,092
20Accounts payable 7,840
Purchase returns and
allowances 7,840
25Accounts payable56,252
Cash56,252
28Accounts payable88,396
Discounts lost 1,804
Cash90,200
d.3Purchases90,200
Accounts payable90,200
11Freight on purchases 350
Cash 350
15Purchases65,400
Accounts payable65,400
20Accounts payable 8,000
Purchase returns and
allowances 8,000
25Accounts payable57,400
Purchase discounts 1,148
Cash56,252
28Accounts payable90,200
Cash90,200
P8.4
a.3Direct materials inventory8,600
Accounts payable8,600
10Direct materials inventory7,200
Accounts payable7,200
12Accounts payable8,600
Direct materials inventory 86
Cash8,514
13Direct materials inventory 210
Cash 210
15Accounts payable1,000
Direct materials inventory1,000
16Direct materials inventory8,300
Accounts payable8,300
28Accounts payable8,300
Cash8,300
b.3Direct materials inventory8,514
Accounts payable8,514
10Direct materials inventory7,200
Accounts payable7,200
12Accounts payable8,514
Cash8,514
13Direct materials inventory 210
Cash 210
15Accounts payable1,000
Direct materials inventory1,000
16Direct materials inventory8,134
Accounts payable8,134
28Accounts payable8,134
Discounts lost 166
Cash8,300
c.3Purchases8,600
Accounts payable8,600
10Purchases7,200
Accounts payable7,200
12Accounts payable8,600
Purchase discounts 86
Cash8,514
13Freight on purchases 150
Insurance on purchases 60
Cash 210
15Accounts payable1,000
Purchases returns and
allowances1,000
16Purchases8,300
Accounts payable8,300
28Accounts payable8,300
Cash8,300
d.3Purchases8,514
Accounts payable8,514
10Purchases7,200
Accounts payable7,200
12Accounts payable8,514
Cash8,514
13Freight on purchases 150
Insurance on purchases 60
Cash 210
15Accounts payable1,000
Purchases returns and
allowances1,000
16Purchases8,134
Accounts payable8,134
28Accounts payable8,134
Discounts lost 166
Cash8,300
P8.5Beginning inventory$ 95,000
+ Purchases ?
= Cost of goods available$622,000
- Cost of goods sold 537,000
= Ending inventory$ 85,000
Purchases on account = $527,000
Beginning accounts payable$ 41,000
+ Purchases on account 527,000
= Total owed to suppliers$568,000
- Cash paid to suppliers ?
= Ending accounts payable$ 47,000
Cash paid to suppliers = $521,000
Beginning prepaid rent$ 13,000
+ Cash paid for rent ?
= Total prepaid rent$ 33,000
- Rent expense 21,000
Ending prepaid rent$ 12,000
Cash paid for rent = $20,000
Beginning prepaid insurance$ 1,200
+ Cash paid for insurance ?
= Total prepaid insurance$ 5,700
- Insurance expense 4,000
= Ending prepaid insurance$ 1,700
Cash paid for insurance = $4,500
Beginning office supplies$ 500
+ Cash paid for office supplies ?
= Total office supplies$ 7,800
- Office supplies expense 7,000
= Ending office supplies$ 800
Cash paid for office supplies = $7,300
Beginning employee-related payables (1)$ 20,600
+ Wages expense 195,000
= Total owed to employees$215,600
- Cash paid to employees ?
= Ending employee-related payables (2)$ 19,500
Cash paid for wages = $196,100
(1) Wages payable [$16,000] + ½ FICA payable [$600] +
Employee income tax payable [$4,000]
(2) Wages payable [$13,000] + ½ FICA payable [$1,000]
+ Employee income tax payable [$5,500]
Beginning employer-related payable (3)$ 2,800
+ Payroll tax expense 21,000
Total owed for payroll taxes$ 23,800
- Cash paid for payroll taxes ?
= Ending employer-related payable (4)$ 3,200
Cash paid for payroll taxes = $20,600
(3) ½ FICA payable [$600] + FUTA payable [$900] +
SUTA payable [$1,300]
(4) ½ FICA payable [$1,000] + FUTA payable [$800] +
SUTA payable [$1,400]
Beginning income taxes payable$ 18,000
+ Income tax expense 24,600
= Total owed for income taxes$ 42,600
- Cash paid for income taxes ?
= Ending income taxes payable$ 20,100
Cash paid for income taxes = $22,500
Cash paid for advertising = $29,000
Since no balance sheet account exists, we must assume that the advertising
expenses were paid in the period incurred.
P8.6
a.Gross pay ($50,000 + $60,000 + $280,000)$390,000
Less: withholdings
FICA ($390,000 * 0.0765) 29,835
FIT—administrative ($50,000 * 0.15) 7,500
FIT—sales ($60,000 * 0.15) 9,000
FIT—executives ($280,000 * 0.25) 70,000
SIT—administrative ($7,500 * 0.1) 750
SIT—sales ($9,000 * 0.1) 900
SIT—executives ($70,000 * 0.1) 7,000
Net pay$265,015
b.Withholdings from employees$124,535
FICA taxes ($390,000 * 0.0765) 29,835
FUTA taxes ($390,000 * 0.008) 3,120
SUTA taxes ($390,000 * 0.054) 21,060
Total payroll-related liabilities$178,550
c.Wage expense = $390,000, total payroll tax expense = $54,015
d.Income Statement
Salary expense$390,000
Payroll tax expense 54,015
Statement of Cash Flows
Cash paid to employees$265,015
Balance Sheet: Current liabilities
FICA payable$59,670
FIT payable 86,500
SIT payable 8,650
FUTA payable 3,120
SUTA payable 21,060
P8.7Beginning prepaid rent$ 5,000
+ Cash paid for rent 48,000
= Total prepaid rent$ 53,000
- Rent expense ?
= Ending prepaid rent$ 6,000
Rent expense = $47,000
Beginning prepaid insurance$ 4,000
+ Cash paid for insurance 36,000
= Total prepaid insurance$ 40,000
- Insurance expense ?
= Ending prepaid insurance$ 1,500
Insurance expense = $38,500
Beginning utilities payable$ 2,400
+ Utilities expense ?
= Total utilities payable$ 53,000
- Cash paid for utilities 50,000
Ending utilities payable$ 3,000
Utilities expense = $50,600
Beginning accrued liabilities$ 6,800
+ Miscellaneous expenses ?
= Total accrued liabilities$624,300
- Cash paid for miscellaneous expenses 620,000
= Ending accrued liabilities$ 4,300
Miscellaneous expenses = $617,500
P8.8Prepaid rent 24,000
Cash 24,000
Rent expense 23,000
Prepaid rent 23,000
Prepaid insurance 15,600
Cash 15,600
Insurance expense 18,100
Prepaid insurance 18,100
Utilities expense 70,450
Utilities payable 70,450
Utilities payable 69,850
Cash 69,850
Miscellaneous expenses652,200
Accrued liabilities652,200
Accrued liabilities654,700
Cash654,700
P8.9
a.3Direct materials inventory19,600
Accounts payable19,600
10Direct materials inventory18,200
Accounts payable18,200
12Accounts payable19,600
Direct materials inventory 196
Cash19,404
15Accounts payable 1,000
Direct materials inventory 1,000
16Direct materials inventory18,800
Accounts payable18,800
31Accounts payable18,800
Cash18,800
b.3Direct materials inventory19,404
Accounts payable19,404
10Direct materials inventory18,200
Accounts payable18,200
12Accounts payable19,404
Cash19,404
15Accounts payable 1,000
Direct materials inventory 1,000
16Direct materials inventory18,424
Accounts payable18,424
31Accounts payable18,424
Discounts lost 376
Cash18,800
P8.10Beginning inventory$ 85,000
+ Purchases of inventory on account ?
= Total inventory available$363,500
- Cost of goods sold 268,500
= Ending inventory$ 95,000
Purchases of inventory on account = $278,500
Beginning accounts payable$ 47,000
+ Purchases of inventory on account 278,500
= Total owed for inventory$325,500
- Cash paid for inventory ?
= Ending accounts payable$ 41,000
Cash paid for inventory = $284,500
Beginning prepaid rent$ 12,000
+ Cash paid for rent ?
= Total prepaid rent$ 23,500
- Rent expense 10,500
= Ending prepaid rent$ 13,000
Cash paid for rent = $11,500
Beginning prepaid insurance$ 1,700
+ Cash paid for insurance ?
= Total prepaid insurance$ 3,200
- Insurance expense 2,000
= Ending prepaid insurance$ 1,200
Cash paid for insurance = $1,500
Beginning office supplies$ 800
+ Cash paid for office supplies ?
= Total office supplies$ 4,000
- Office supplies expense 3,500
= Ending office supplies$ 500
Cash paid for office supplies = $3,200
Beginning employee-related payables (1)$ 19,100
+ Wages expense 97,500
= Total employee-related payables$116,600
- Cash paid to employees ?
= Ending employee-related payables (2)$ 21,000
Cash paid to employees = $95,600
(1) Wages payable [$13,000] + ½ FICA payable [$1,100] +
Employee income tax payable [$5,000]
(2) Wages payable [$16,000] + ½ FICA payable [$500] +
Employee income tax payable [$4,500]
Beginning employer-related payables (3)$ 3,300
+ Payroll tax expense 10,500
= Total employer-related payables$ 13,800
- Cash paid for payroll taxes ?
= Ending employer-related payables (4)$ 2,700
Cash paid for payroll taxes = $11,100
(3) ½ FICA payable [$1,100] + FUTA payable [$800]
+ SUTA payable [$1,400]
(4) ½ FICA payable [$500] + FUTA payable [$900]
+ SUTA payable [$1,300]
Beginning income taxes payable$ 20,000
+ Income tax expense 12,300
= Total income taxes payable$ 32,300
- Cash paid for income taxes ?
= Ending income taxes payable$ 18,100
Cash paid for income taxes = $14,200
Cash paid for advertising = $14,500
Since no balance sheet account exists, we must assume that all
advertising expenses were paid in the period incurred.
CASES
C8.1Answer will vary depending on companies chosen.
C8.2
a.Beginning inventory$ 191,870
+ Purchases on account ?
= Total inventory available$7,856,675
- Cost of goods sold 7,541,606
= Ending inventory$ 315,069
Purchases on account = $7,664,805
Beginning accounts payable$ 898,436
+ Purchases on account 7,664,805
= Total amount owed for purchases$8,563,241
- Cash paid for inventory purchases ?
= Ending accounts payable$ 785,345
Cash paid for inventory purchases = $7,777,896 thousand
b.Beginning other assets$ 522,225
+ Cash paid for operating costs ?
= Total other assets$1,644,649
- ½ Operating expense & taxes 851,483
= Ending other assets$ 793,166
Cash paid for operating costs = $1,122,424
Beginning accrued liabilities$ 609,132
+ ½ Operating expenses & taxes 851,484
= Total accrued liabilities$1,460,616
- Cash paid for operating costs ?
= Ending accrued liabilities$ 556,323
Cash paid for operating costs = $904,293
Total cash paid for operating costs = $2,026,717 thousand
CRITICAL THINKING
CT8.1Including warehousing costs as part of inventory would lower operating costs and increase cost of goods sold. However, it is not a dollar-for-dollar trade. Since the warehouse costs would be assigned to inventory, these costs would be applied to both cost of goods sold and ending inventory. Thus the impact of this would be to increase income. The controller is not justified because merchandise inventory should include the costs necessary to receive the inventory not the costs incurred to hold the inventory.
CT8.2Answers will vary. Students should include columns for gross payroll, all withholdings from employees, and net payroll as well as columns for the employer-related income taxes.
ETHICAL CHALLENGES
EC8.1Answers will vary about the ethics of the situation; however, Mr. X is not fixing the balance sheet problem by not taking discounts—inventory is higher, but cash is lower.
EC8.2Answers will vary, but your supervisor should be informed.
COMPUTER APPLICATIONS
CA8.1
Hours / Regular / Overtime / Gross / Federal / State / Social / NetEmployee / Worked / Pay / Pay / Pay / Withheld / Withheld / Security / Medicare / Pay
Scott / 85 / 800.00 / 75.00 / 875.00 / 131.25 / 13.13 / 54.25 / 12.69 / $663.68
David / 90 / 800.00 / 150.00 / 950.00 / 142.50 / 14.25 / 58.90 / 13.78 / $720.57
Stan / 80 / 800.00 / 0 / 800.00 / 120.00 / 12.00 / 49.60 / 11.60 / $606.80
Sandy / 70 / 700.00 / 0 / 700.00 / 105.00 / 10.50 / 43.40 / 10.15 / $530.95
Janice / 100 / 800.00 / 300.00 / 1100.00 / 165.00 / 16.50 / 68.20 / 15.95 / $834.35
Suzanne / 83 / 800.00 / 45.00 / 845.00 / 126.75 / 12.68 / 52.39 / 12.25 / $640.93
Ryan / 84 / 800.00 / 60.00 / 860.00 / 12.00 / 12.90 / 53.32 / 12.47 / $652.31
Laverne / 89.5 / 800.00 / 142.50 / 942.50 / 141.38 / 14.138 / 58.44 / 13.67 / $714.87
Laura / 75.5 / 755.00 / 0 / 755.00 / 113.25 / 11.33 / 46.81 / 10.95 / $572.66
Ema / 80 / 800.00 / 0 / 800.00 / 120.00 / 12.00 / 49.60 / 11.60 / $606.80
Total / 8627.50 / 1294.13 / 129.43 / 534.91 / 125.11 / $6,543.92
Gross / Social / Payroll
Pay / Security / Medicare / FUTA / SUTA / Taxes
Ukaegbu Company / 8627.50 / 534.91 / 125.10 / 69.02 / 465.89 / $1,194.92
CA8.2
a. / Inventory, beginning balance / 10,000Add: purchases / 460,000
Total inventory / 470,000
Less:cost of goods sold / 450,000
Inventory, ending balance / 20,000
Acounts payable, beginning balance / 8,000
Add: purchases / 460,000
Total accounts payable / 468,000
Less: cash paid for inventory / 456,000
Accounts payable, ending balance / 12,000
b. / Inventory, beginning balance / 20,000
Add: purchases / 910,000
Total inventory / 930,000
Less:cost of goods sold / 900,000
Inventory, ending balance / 30,000
Acounts payable, beginning balance / 16,000
Add: purchases / 910,000
Total accounts payable / 926,000
Less: cash paid for inventory / 902,000
Accounts payable, ending balance / 24,000
c. / Inventory, beginning balance / 20,000
Add: purchases / 440,000
Total inventory / 460,000
Less:cost of goods sold / 450,000
Inventory, ending balance / 10,000
Acounts payable, beginning balance / 12,000
Add: purchases / 440,000
Total accounts payable / 452,000
Less: cash paid for inventory / 444,000
Accounts payable, ending balance / 8,000
d. / Inventory, beginning balance / 70,000
Add: purchases / 885,000
Total inventory / 955,000
Less:cost of goods sold / 875,000
Inventory, ending balance / 80,000
Acounts payable, beginning balance / 38,000
Add: purchases / 885,000
Total accounts payable / 923,000
Less: cash paid for inventory / 873,000
Accounts payable, ending balance / 50,000
CA8.3
An EIN is an Employer Identification Number. This is a nine-digit number that the IRS uses to identify taxpayers that are required to file business tax returns. It functions much like a social security number for individuals.
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