Sinclair Manufacturing Company experienced the following accounting events during its first year of operation. With the exceptio
n of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared in accordance with GAAP
1. Acquired $68,000 cash by issuing common stock
2. Paid $8,700 for the materials used to make its products, all of which were started and completed during the year.
3. Paid salaries of $4,500 to selling and administrative employees
4. Paid wages of $10,000 to production workers
5. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life 6. Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a five-year useful life 7. Sold inventory to customers for $35,000 that had cost $14,000 to make Required Indicate how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA), or NA for not affected.
1. Acquired $68,000 cash by issuing common stock
2. Paid $8,700 for the materials used to make its products, all of which were started and completed during the year.
3. Paid salaries of $4,500 to selling and administrative employees
4. Paid wages of $10,000 to production workers
5. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life 6. Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a five-year useful life 7. Sold inventory to customers for $35,000 that had cost $14,000 to make Required Indicate how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA), or NA for not affected.
1 answer:
Answer:
Please see the attached image for the Horizontal Financial Statements of Sinclair Manufacturing Company.
Explanation:
5. FURNITURE - Straight Line Method
Book Value of Furniture = Cost of Acquisition - Residual Value
Cost of Acquisition = $9,600
Residual Value = $1,600
Book Value of Furniture = $9,600 - $1,600
Book Value of Furniture = $8,000
Useful Life = 4 years
Depreciation Expense = $8,000 / 4 years
Depreciation Expense = $2,000 per year
6. EQUIPMENT - Straight Line Method
Book Value of Equipment = Cost of Acquisition - Residual Value
Cost of Acquisition = $16,000
Residual Value = $1,000
Book Value of Furniture = $16,000 - $1,000
Book Value of Furniture = $15,000
Useful Life = 5 years
Depreciation Expense = $15,000 / 5 years
Depreciation Expense = $3,000 per year
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