# Computation of Revenue, COGS and Operating Cost

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:

Debit                         Credit

Cash                                                     \$  14,500

Accounts Receivable                            12,000

Inventory                                                14,800

Equipment                                              30,000

Accumulated Depreciation                                                   \$  9,000

Accounts Payable                                                                      12,100

Unearned Revenue                                                                     3,000

Common Stock                                                                           50,200

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:

1)

\$43,200 was paid to suppliers for inventory

2)

\$30,000 was paid for operating costs

3)

\$4,200  was paid on January 1, 2012 for a two-year insurance policy

On December 31, 2012, the following other information was available:

1)       Customers owed Howdy \$18,500

2)       Howdy owed suppliers \$16,500

3)       Howdy owed their employees \$900

4)
Howdy owed their customers \$6,000 in services.

5)
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:                                                                           \$  ________