**Educational Content: Understanding Financial Statements**In this example, we explore how events affect financial statements using a horizontal model. This is a practical scenario provided by Hardy Merchandising Company, demonstrating changes across different accounts and statements.### Instructions**Identify the events** described and record them in a horizontal statements model. Use the Statement of Cash Flows to categorize into:- Operating activities (OA)- Investing activities (IA)- Financing activities (FA)**Note:** Decreases in account balances and cash outflows must be entered with a minus sign. Leave cells blank if no input is needed.### Table Overview**Hardy Merchandising Company****Effect of Events on the Financial Statements****Balance Sheet**The balance sheet is divided into several sections:- **Assets:** Includes Cash, Accounts Receivable, and Inventory.- **Liabilities:** Includes Accounts Payable.- **Stockholders' Equity:** Consists of Common Stock and Retained Earnings.**Income Statement**- **Revenue**- **Expenses**- **Net Income****Statement of Cash Flows**- Categorizes cash movements related to operating, investing, and financing activities.#### Table Details:- **Beginning Balance for Cash:** $24,500- **Common Stock:** $24,500The table is structured to record the impact of different events (labeled 1, 2a, 2b, 3) on the above sections. Ending balances and net changes in cash are calculated as "NC" to denote the Net Change in cash.This exercise helps in understanding how each financial event affects overall financial health, facilitating better financial planning and analysis. **Scenario:**During Year 1, Hardy Merchandising Company purchased $15,000 of inventory on account. Hardy sold inventory on account that cost $11,300 for $16,900. Cash payments on accounts payable were $9,400. There was $15,000 cash collected from accounts receivable. Hardy also paid $3,500 cash for operating expenses. Assume that Hardy started the accounting period with $24,500 in both cash and common stock.**Required:**a. Identify the events described in the preceding paragraph and record them in a horizontal statements model. Classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA).b. What is the balance of accounts receivable at the end of Year 1?c. What is the balance of accounts payable at the end of Year 1?d. What are the amounts of gross margin and net income for Year 1?e. Determine the amount of net cash flow from operating activities.**Instructions:**Complete this question by entering your answers in the tabs provided. Use the horizontal statements model to accurately record each transaction. Remember to classify cash flows appropriately and indicate decreases with a minus sign if necessary. **Note:** There are no graphs or diagrams associated with this scenario.

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Description: **Educational Content: Understanding Financial Statements**In this example, we explore how events affect financial statements using a horizontal model. This is a practical scenario provided by Hardy Merchandising Company, demonstrating changes acros

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(1) During Year 1, Hardy Merchandising Company purchased $15,000 of inventory on account. (2) Hardy sold inventory on account that cost $11,300 for $16,900. (3) Cash payments on accounts payable were $9,400. (4) There was $15,000 cash collected from accounts receivable. (5) Hardy also paid $3,500 cash for operating expenses. Assume that Hardy started the accounting period with $24,500 in both cash and common stock. Required: a. Identify the events described in the preceding paragraph and record them in a horizontal statements model like the following one. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. What is the balance of accounts receivable at the end of Year 1? c. What is the balance of accounts payable at the end of Year 1?

(1) During Year 1, Hardy Merchandising Company purchased $15,000 of inventory on account. (2) Hardy sold inventory on account that cost $11,300 for $16,900. (3) Cash payments on accounts payable were $9,400. (4) There was $15,000 cash collected from accounts receivable. (5) Hardy also paid $3,500 cash for operating expenses. Assume that Hardy started the accounting period with $24,500 in both cash and common stock. Required: a. Identify the events described in the preceding paragraph and record them in a horizontal statements model like the following one. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. What is the balance of accounts receivable at the end of Year 1? c. What is the balance of accounts payable at the end of Year 1?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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