Question

Dan Watson started a small merchandising business in 2018. The business experienced the following events during its first year of operation. Assume that Watson uses the perpetual inventory system. Acquired $30,000 cash from the issue of common stock. Purchased inventory for $18,000 cash. Sold inventory costing $15,000 for $32,000 cash. Required Record the events in a horizontal statement model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. Prepare an income statement for 2018 (use the multistep format). What is the amount of total assets at the end of the period?

Answer 1

Answer:

Horizontal statemtent:

         Assets                      =   Liabilities    +    Equity

1)       30,000                      =        0            +   30,000

2) 18,000- 18,000              =        0            +      0

3)        17,000                     =        0            +   17,000

Cash flow:

+30,000 Financing

Operating

collected from customer 32,000

paid to suppliers             (18,000)

           net                         14,000

total cash flow                44,000

Income statment

sales revenue 32,000

COGS              (15,000)

income              17,000

Total assets:  47,000 (44,000 cash + 3,000 inventory)

Explanation:

assets:

1) +30,000 cash from common stock

2) 18,000 inventory - 18,000 cash = 0 effect on total assets

3) 32,000 cash - 15,000 inventory = 17,000

total assets: 30,000 + 17,000 = 47,000