The comparative balance sheets of Titan Company for the years ended December 31,
ID: 2435091 • Letter: T
Question
The comparative balance sheets of Titan Company for the years ended December 31, 2009 and 2010, reported the following selected amounts:Assets: Office supplies inventory $2,000 |$800
Liabilities: Unearned Rent Revenue $11,000| $10,500
The 2010 Income statement reported the following:
Revenues: Rent Revenue $12,000
Expenses: Office supplies expense $15,000
A. Calculate the total amount of office supplies purchased during 2010.
B. Calculate the total amount of rent collected during 2010.
C. In what section of the statement of cash flows would the payments for office supplies appear?
D. In what section of the statement of cash flows would the collection for rents appear?
Explanation / Answer
a) From the balance sheet, the office supplies inventory is reduced from $2,000 to $800. Therefore, office supplies inventory sold during 2010 is worth $1,200. If at the time of purchase, the company expects to consume the supplies before the next financial statement date, it may choose to debit(increase)an expense account rather than an asset account. From the balance sheet and the income statement, the company purchased $13,000 worth supplies and used $14,200 worth with the remaining balance of $800 b) Unearned revenue become earned either through the passage of time or through providing the service. Similar to the case for prepaid expenses, companies may credit (increase) revenue account when they recive cash for future purposes. From the balance sheet, the company has earned a revenue of $500 in 2010. An additional $14,500 revenue is reported on the income statement as they will receive cash for future purposes. c) The payments for office supplies would appear on the Cashflows from operating activities. d) The collection of rent would also appear on the cash flows from Operating activities.