Howdy Company keeps its accounting records on a cash basis during the year. At year-end, it adjusts its books to the accrual basis for preparing its financial statements. At the end of 2011, Howdy Company reported the following balance sheet items:
It is now the end of 2012. The company's checkbook shows cash receipts from customers of $87,000 and cash payments of $77,400. An examination of the cash payments revealed the following:
$43,200 was paid to suppliers for inventory
$30,000 was paid for operating costs
$4,200 was paid on January 1, 2012 for a two-year insurance policy
On December 31, 2012, the following other information was available:
Customers owed Howdy $18,500
Howdy owed suppliers $16,500
Howdy owed their employees $900
Howdy owed their customers $6,000 in services.
Howdy's ending inventory balance was $15,400.
Additionally, Howdy is depreciating their equipment using straight-line depreciation over a 10-year life (no salvage value).
Required:
Using accrual-based accounting, answer the following. Note that you are not required to consider the tax impact of these transactions.
a. Revenues for 2012:
b. Cost of Goods Sold for 2012:
c. Operating costs for 2012: