The Bix Company was incorporated on September 1, 20X0. Bix had 30 holders of common stock. Rianna Bix, the The Bix Company prepared the following accrual-basis income statement and analysis of its transactions for the month of president and chief executive officer, held 58% of the shares. The company rented space in chain discount stores and September specialized in selling ladies' accessories. Bix's first location was in a store that was part of The City Market in Click the icon to view the income statement.) Des Moines. The following events occurred during September: (Click the icon to view the events and transactions.) (Click the icon to view the transaction analysis.) Read the requirements Requirement 1. Suppose Bix measured performance on the cash basis instead of on the accrual basis. Compute the cash receipts, cash disbursements, and net cash inflow (outflow) for September by completing a cash-basis income statement. (Leave any unused cells blank. Use a minus sign or parentheses for a net cash outfiow.) Bix Company Income Statement-Cash Basis For the Month Ended September 30, 20x0 Operating cash receipts Total operating cash receipts Deduct operating cash disbursements Total operating cash disbursements Net cash inflow (outflow) from operations The Requirement 2. Which measure, accrual-based net income or net cash inflows (outflows), provides a better measure accomplishment? Why? basis, which records revenue when v. provides a better measure of revenue. Users of the financial statements believe that this method provides the best framework for relating and, therefore, provides the more proper measure of economic accomlishment i X - Data Table Bix Company Income Statement For the Month Ended September 30, 20X0 Sales revenue $ 100,000 Deduct expenses Cost of goods sold $ 25,000 Wages and commissions expense 31,000 Rent expense 7,800 3,000 Depreciation 66,800 $ Net income (loss) 33,200 Assets Liabilities + Stockholders' Equity Merch. Prepaid Equip. Paid-in Retained Cash + AIR + Inv. + Rent + and Fixt. N/P + A/P + Capital + Earnings a. 350,000 = 350,000 b. (30,000) + 30,000 C. 55,000 55,000 d1. 47,000 + 53,000 = 100,000 d2. (25,000) (25,000) e. 5,000 + (5,000) f. (20,000) = (20,000) (5,000) + g. 72,000 = 67,000 h. (2,400) + 2,400 11 (7,000) (7,000) j. (31,000) = (31,000) k. (3,000) 11 (3,000) (800) I. (800) = 306,600 48,000 60,000 1,600 69,000 67,000 35,000 350,000 33,200 Bal + + + + a. The company was incorporated. Common stockholders invested $350,000 cash. b. Purchased merchandise inventory for cash, $30,000. c. Purchased merchandise inventory on open account, $55,000. d. Merchandise carried in inventory at a cost of $25,000 was sold for cash for $47,000 and on open account for $53,000, for a grand total of $100,000. Bix (not The City Market) carries and collects these accounts receivable. e. Collection of accounts receivable, $5,000. See transaction (d). f. Payments of accounts payable $20,000. See transaction (c). g. Special display equipment and fixtures were acquired on September 1 for $72,000. Their expected useful life was 24 months. This equipment was removable. Bix paid $5,000 as a down payment and signed a promissory note for $67,000. Also see transaction (k). h. On September 1, Bix signed a rental agreement with The City Market. The agreement called for a flat $800 per month, payable quarterly in advance. Therefore, Bix paid $2,400 cash on September 1. i. The rental agreement also called for a payment of 7% of all sales. This payment was in addition to the flat $800 per month. In this way, The City Market would share in any success of the venture and be compensated for general services such as cleaning and utilities. This payment was to be made in cash on the last day of each month as soon as the sales for the month had been tabulated. Therefore, Bix made the payment on September 30. j. Employee wages and sales commissions were all paid for in cash. The amount was $31,000. k. Depreciation expense of $3,000 was recognized ($72,000/24 months). See transaction (g). I. The expiration of an appropriate amount of prepaid rental services was recognized. See transaction (h)