Comments on Information Gathered and Carmen's Concerns 1. 2. 3. 4. 5. 6. 7. 8. 9. The three month sales total is the sum of the cash sales ($7,400) and credit sales ($320). Cost of sales is derived from the following equation Beginning merchandise inventory Plus Purchases Equals Total available merchandise Less Ending merchandise inventory Equals Cost of sales $3,300 2,900 $6,200 4,100 Rent expense is $1,800 of $600 per month times three months. Paid in cash. Part-time employee expenses ($1600) is the sum of cash paid ($1510) plus amount owed ($90). Supplies expense ($80) is beginning supplies inventory ($100) less supplies inventory on hand on March 31 ($20). The prepaid advertising ($150) was run by the local paper on April 2. The benefit of the asset expired so the asset became an expense. The commercial sewing machine purchase led to an $1800 asset being recorded (a future benefit). The asset's benefit was partly consumed during May and June resulting in a $60 depreciation charge ($1800/ 5 years/ 12 months x 2 months straight line depreciation.) Some of the future benefits of the computer and related software asset were consumed during the three month period. A $250 depreciation charge must be recognized ($2000/ 2/ 12/ x 3 straight line depreciation.) Cash balance at the end of period lower than beginning balance. See Question 1 discussion. 10. Four month's interest must be recorded on the cousins' $10,000 loan. ($10,000 x .06 x 4/ 12). Carmen has "rented" the cousins' money for four months. (She forgot to include the March rent in her March 31 balance sheet.)