Question

Vernon Manufacturing Company experienced the following accounting events during its first year of operation. With the exception 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 $57,000 cash by issuing common stock.
2. Paid $8,000 for the materials used to make its products, all of which were started and completed during the year.
3. Paid salaries of $3,700 to selling and administrative employees.
4. Paid wages of $6,300 to production workers.
5. Paid $8,900 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,300 estimated salvage value and a four-year useful life.
6. Paid $7,700 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,500 estimated salvage value and a two-year useful life.
7. Sold inventory to customers for $25,100 that had cost $13,100 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.

Answer 1