Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory for cash. (2) Returned $100 of the inventory purchased in Event 1. Based on this information, which of the following shows how the recognition of the return will affect the company’s financial statements?
Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory for cash. (2) Returned $100 of the inventory purchased in Event 1. Based on this information, which of the following shows how the recognition of the return will affect the company’s financial statements?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Amarillo Company experienced the following events during its first accounting period.
- (1) Purchased $5,000 of inventory for cash.
- (2) Returned $100 of the inventory purchased in Event 1.
Based on this information, which of the following shows how the recognition of the return will affect the company’s financial statements?
Transcribed Image Text:O
O
Assets
$(100)
Assets
$ (100)
Balance Sheet
= Liabilities +
$ (100)
Assets
$ (100)
Balance Sheet
= Liabilities +
$ (100)
Balance Sheet
Assets = Liabilities +
ΝΑ
ΝΑ
Balance Sheet
= Liabilities +
$(100)
Equity
ΝΑ
Equity
ΝΑ
Equity
ΝΑ
Equity
ΝΑ
Income Statement
Revenues - Expenses = Net Income
ΝΑ
ΝΑ
ΝΑ
Revenues
ΝΑ
Revenues
ΝΑ
Revenues
ΝΑ
Income Statement
Expenses =
$100
Net Income
$ (100)
Income Statement
Expenses = Net Income
ΝΑ
ΝΑ
Income Statement
Expenses = Net Income
ΝΑ
ΝΑ
Statement of
Cash Flows
$100 Operating
Statement of
Cash Flows
ΝΑ
Statement of
Cash Flows
$100 Operating
Statement of
Cash Flows
ΝΑ
Expert Solution
Step 1
Balance sheet, income statement and cash flow statement are the financial statements which are prepared at the end of every period. Each statement has its own use for the users of these statement.
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