Answer:
Net Income = $33,820
Assets = Liabilities + Stockholders' Equity = $108,620
Explanation:
Note: This question is not complete as the introductory paragraph and the numbering are omitted. The complete question is therefore provided before answering the question as follows:
The Pet Store experienced the following events for the Year 1 accounting period:
1. Acquired $70,000 cash from the issue of common stock.
2. Purchased $61,000 of inventory on account.
3. Received goods purchased in Event 2 FOB shipping point; freight cost of $1,870 paid in cash.
4. Sold inventory on account that cost $51,000 for $97,000.
5. Freight cost on the goods sold in Event 4 was $1,020. The goods were shipped FOB destination. Cash was paid for the freight cost.
6. Customer in Event 4 returned $4,540 worth of goods that had a cost of $2,320.
7. Collected $79,540 cash from accounts receivable.
8. Paid $56,200 cash on accounts payable.
9. Paid $3,020 for advertising expense.
10. Paid $4,050 cash for insurance expense.
Required:
a. Which of these events affect period (selling and administrative) costs? Which result in product costs? If neither, label the transaction NA.
b. Record each event in a horizontal statements model. The first event is recorded as an example. (In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash, and NA to indicate the element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus sign.)
The explanation of the answer is now given as follows:
a. Which of these events affect period (selling and administrative) costs? Which result in product costs? If neither, label the transaction NA.
Period costs are costs that include selling and asministrative costs which are not related to cost of producing a product.
Product costs can be described as costs of creating or producing a product that is meant for sale to customers.
Therefore, we have:
<u>Event </u> <u> Cost </u>
1 . NA
2. Product costs
3. Product costs
4. NA
5. NA
6. NA
7. NA
8. NA
9. Period costs
10. Period costs
b. Record each event in a horizontal statements model. The first event is recorded as an example. (In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash, and NA to indicate the element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus sign.)
Note: See the attache excel file for the horizontal statements.
In the attached excel file, Retained Earnings is equal to the balance of the Net Income which is equal to $33,820.
Under the horizontal statements in the attached excel, an evidence to show that Assets is equal to Liabilities Plus Stockholders' Equity. That is:
Assets = Liabilities + Stockholders' Equity = $108,620
