Question

Dan Watson started a small merchandising business in 2018. The business experienced the following events during...

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.

  1. Acquired $34,000 cash from the issue of common stock.

  2. Purchased inventory for $27,200 cash.

  3. Sold inventory costing $15,400 for $29,500 cash.

Required

  1. 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.
  2. Prepare an income statement for 2018 (use the multistep format).
  3. What is the amount of total assets at the end of the period?

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. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with a minus sign.)
DAN WATSON MERCHANDISING
Effect of Events on Financial Statement
Event Assets = Stockholders’ Equity Revenue – Expenses = Net Income Statement of Cash Flows
Cash + Inventory = Common Stock + Retained Earnings
1. + = + – =
2. + = + – =
3a. + = + – =
3b. + = + – =
Total + = + – =

Prepare an income statement for 2018 (use the multistep format).
DAN WATSON MERCHANDISING
Income Statement
For the Year Ended December 31, 2018
Operating expenses

What is the amount of total assets at the end of the period?
Total assets
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

a

DAN WATSON MERCHANDISING

Effects of Events of Financial Statement
Event Assets Stockholders Equity Revenue - Expenses = Net income Statement of cash flow
Cash + Inventory = Common stock + Retained earnings
1. $34,000 $34,000 $34,000 FA
2 -27,200 27,200 -27,200 OA
3a 29,500 29,500 29,500 29,500 29,500 OA
3b -15,400 -15,400 15,400 -15,400
Total $36,300 - 11,800 = $34,000 + 14,100 29,500 - 15,400 = 14,100 36,300 NC

b

DAN WATSON MERCHANDISING

Income Statement

For The Year Ended December 31, 2018
Sales $29,500
Cost of goods sold 15,400
Gross profit 14,100
Expenses
Net profit $14,100

c

Total assets the end of period = $36,300 Cash + 11,800 Inventory = $48,100

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Dan Watson started a small merchandising business in 2018. The business experienced the following events during...
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 $34,000 cash from the issue of common stock. Purchased inventory for $27,200 cash. Sold inventory costing $16,000 for $30,500 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, NC for...
Dan Watson started a small merchandising business in Year 1. The business experienced the following events...
Dan Watson started a small merchandising business in Year 1. 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 a. 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,...
Expert Computers was started in 2018. The company experienced the following accounting events during its first...
Expert Computers was started in 2018. The company experienced the following accounting events during its first year of operation: 1. Started business when it acquired $87,000 cash from the issue of common stock. 2. Purchased merchandise with a list price of $71,000 on account, terms 3/10, n/30. 3. Paid off one-half of the accounts payable balance within the discount period. 4. Sold merchandise on account for $57,700. Credit terms were 2/20, n/30. The merchandise had cost Expert Computers $34,600. 5....
Cordell Inc. experienced the following events in Year 1, its first year of operation: Received $40,000...
Cordell Inc. experienced the following events in Year 1, its first year of operation: Received $40,000 cash from the issue of common stock. Performed services on account for $82,000. Paid a $6,000 cash dividend to the stockholders. Collected $76,000 of the accounts receivable. Paid $53,000 cash for other operating expenses. Performed services for $19,000 cash. Recognized $3,500 of accrued utilities expense at the end of the year. Required a. & c. Identify the events that result in revenue or expense...
Rainey Enterprises loaned $50,000 to Small Co. on June 1, 2018, for one year at 9...
Rainey Enterprises loaned $50,000 to Small Co. on June 1, 2018, for one year at 9 percent interest. Required Show the effects of the following transactions in a horizontal statements. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). For any element not affected by the event, leave the cell blank. (Not every cell will require entry. Do not round intermediate calculations. Enter any decreases to...
Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events...
Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: Earned $1,900 of cash revenue. Borrowed $3,000 cash from the bank. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on September 1, Year 1, had a one-year term and an 8 percent annual interest rate. What is the amount of interest expense in Year 1? What amount of cash was...
Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events...
Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $1,200 of cash revenue. 2. Borrowed $2,100 cash from the bank. 3. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on September 1, Year 1, had a one-year term and an 6 percent annual interest rate. Required: a. What is the amount of interest payable at December 31,...
Mercury Corporation issued 6,500 shares of no-par common stock for $20 per share. Mercury also issued...
Mercury Corporation issued 6,500 shares of no-par common stock for $20 per share. Mercury also issued 3,800 shares of $45 par, 6 percent noncumulative preferred stock at $55 per share. Required Record these events in a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element was not affected by the event, leave the cell blank.
At the beginning of 2018, the Redd Company had the following balances in its accounts:   ...
At the beginning of 2018, the Redd Company had the following balances in its accounts:    Cash $ 8,300 Inventory 2,300 Common stock 7,800 Retained earnings 2,800    During 2018, the company experienced the following events: Purchased inventory that cost $5,800 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $530 were paid in cash. Returned $300 of the inventory that it had purchased because the inventory was damaged in...
Han’s Supplies’ bank statement contained a $280 NSF check that one of its customers had written...
Han’s Supplies’ bank statement contained a $280 NSF check that one of its customers had written to pay for supplies purchased. Required a. & c. Show the effects of the following transactions on the financial statements in the horizontal statements model. (a) Recognize the NSF check, (c) Customer redeems the check by giving Hans $300 cash in exchange for the bad check. The additional $20 was a service fee charged by Hans. In the Cash Flow column, use OA to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT