Cova Corporation earned revenues of $40 million during 2013 and ended the year w
ID: 2507330 • Letter: C
Question
Cova Corporation earned revenues of $40 million during 2013 and ended the year with net income of $6 million. During 2013, Cova collected $24 million from customers and paid cash for all of its expenses plus an addition $3 million for amounts payable at December 31, 2013. Answer these questions about Cova's operating results, financial position and cash flows during 2013:
1. How much were Cova's total expenses? Show your work
2. Identify all the items that Cova will report on its 2013 income statement. Show each amount.
3. Cova begain 2013 with receivables of $10 million. All sales are on account. What was the company's receivables balances at the end of 2013? Identify the appropriate financial statement and show how Cova should report ending receivables in 2013 annual report.
4. Cova began 2013 owing accounts payable of $7 million. All expenses are incurred on account. During 2013 Cova paid $37 million on account. How much in accounts payable did the company owe at the end of 2013? Identify the appropriate financial statement and show how Cova should report accounts payable in its 2013 annual report.
Explanation / Answer
a) Tota expensese = reveneu - profit = $40 million-6 million = $34 million
b)Revenue = $40 million
Expenses= $34 million
Profit = $6 million
c) company's receivables balances at the end of 2013 = beginning balace + uncollected revenue = 10 million+ (40-24) million= $26 million
appropriate financial statement = balance sheet
Cova should report receivables under Account Receivable in Balance sheet
Account Receivable = $26 million
d) company owe at the end of 2013 = beginning balace + expenses - cash paid for expenses = 7 + 34 -(34+3)= $4 million
appropriate financial statement = balance sheet
Cova should report payable under Account Payable in Balance sheet
Account Payable = $4 million