End of Chapter Question 6.33

Racey has prepared an income statement for the 12-month reporting period ended 30 June on a cash basis, showing a $47,480 profit. The cash-based statement shows the following:

Sales			$305,100
Inventory purchased			180,400
Gross profit			124,700
Expenses
Salary and wages			31,200
Administration			20,700
Rent			10,100
Advertising			6,200
Interest			5,240
Insurance			3,780

Additional information

		The accounts receivable and accounts payable balances at the start of the reporting period were $18,000 and $10,800 respectively. At the end of the reporting period, Racey had accounts receivable of $23,300 and accounts payable of $21,740.
		The opening inventory was $35,200 and the closing inventory was $41,800.
		An advertising invoice of $3,260 had not been paid.
		The business has equipment that cost $44,400. It has a useful life of 5 years and an expected salvage value of $4,800.
		The insurance expense represents the 12-month premium on a policy that was taken out on 30 April.

Racey Income statement for the 12-month reporting period ended 30 June Cash basis ($) Adjustments ($) Accrual basis ($) Sales 305100 Cost of sales (inventory purchased) 180400 35200 41800 Gross profit 124700 Expenses Salary and wages 31200 Administration 20700 Rent 10100 Advertising 6200 3260 Interest 5240 Insurance 3780