Question

Lay Perfect Pillow Company sells specialty pillows and accessories to customers. Its fiscal year ends on December 31. The following transactions occurred in the current year:
Purchased $250,000 of new pillow inventory; paid $90,000 in cash and owed the rest on account.
Paid employees $180,300 in wages for work during the year; an additional $3,700 for the current year's wages will be paid in January of the next year.
Sold pillows to customers for $750,000; received $500,000 in cash and customers owed the rest on account. The cost of the pillow inventory to Lay Perfect Pillow was $485,000.
Paid $17,200 cash for utilities for the year.
Received $70,000 from customers as deposits on orders of new pillows to be sold to the customers in January of the next year.
Received a $19,130 utilities bill for December of the current year that will be paid in January of the next year.
Complete the following statements
Cash Basis Income Statement Accrual Basis Income Statement
Statement Statement
Revenues Revenues
Cash Sales Sales to Customers
Customer Deposits
Expenses Expenses
Inventory Purchase Cost of Sales
Wages Paid Wages expense
Utilities paid Utilities expense
Net Income Net Income

Answer 1

Answer and Explanation:

The preparation of the following statement is

Cash Basis            Statement     Accrual Basis               Statement

Income Statement        Income Statement

Revenues                                         Revenues

Cash Sales             $500,000      Sales to Customers     $750,000

Customer Deposits $70,000  

Total                        $570,000       Total                             $750,000

Expenses                                           Expenses  

Inventory Purchase $90,000         Cost of Sales               $485,000

Wages Paid             $180,300         Wages expense         $184,000

Utilities paid             $17,200            Utilities expense         $19,130

Total                         $287,500         Total                             $688,130

Net Income               $282,500        Net Income                  $61,870