Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of 2020, her accountant computes her accrual basis income that is used on her tax return. For 2020, Selma had cash receipts of $1,400,000, which included $200,000 collected on accounts receivable from 2019 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2020, she had $250,000 in accounts receivable from customers, all from 2020 sales. Required:
a. Compute Selma's accrual basis gross receipts for 2020
b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2014 was $1.3 million. At the end of 2019, she had merchandise on hand with a cost of $150,000. At the end of 2020, the cost of merchandise on hand was $300,000. Compute Selma's gross income from merchandise sales for 2020.

a. $1,350,000

b. $200,000

Explanation:

a. Selma's accrual basis gross receipts for 2020

= cash receipts + accounts receivables - cash collected from 2019 sales - bank loan

= $1,400,000 + $250,000 - $200,000 -

$100,000

= $1,350,000

b. Selma's gross income from merchandise sales 2020.

We need to calculate first the cost of goods sold during 2020.

The cost of goods sold during 2020

= Total purchase made during 2020 + ending inventory 2019 - ending inventory 2020

= $1,300,000 + $150,000 - $300,000

= $1,150,000

The Gross profit for 2020

= Gross receipts - Cost of goods sold

= $1,350,000 - $1,150,000

= $200,000

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.