business was started when the company received $50,000 fro 2. Purchased equipment inventory of $380,000 on account. 3. Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $330,000. 4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 2 percent commor of sales. 5. Paid the sales tax to the state agency on $400,000 of the sales. 6. On September 1, Year 1, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, Year 2. 7. Paid $6.200 for warranty repairs during the year. 8. Paid operating expenses of $78,000 for the year. 9. Paid $250,000 of accounts payable. 10. Recorded accrued interest on the note issued in transaction no. 6. Required a. Record the given transactions in a horizontal statements model. b. Prepare the income statement, balance sheet, and statement of cash flows for Year 1. c. What is the total amount of current liabilities at December 31, Year 1?

business was started when the company received $50,000 fro 2. Purchased equipment inventory of $380,000 on account. 3. Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $330,000. 4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 2 percent commor of sales. 5. Paid the sales tax to the state agency on $400,000 of the sales. 6. On September 1, Year 1, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, Year 2. 7. Paid $6.200 for warranty repairs during the year. 8. Paid operating expenses of $78,000 for the year. 9. Paid $250,000 of accounts payable. 10. Recorded accrued interest on the note issued in transaction no. 6. Required a. Record the given transactions in a horizontal statements model. b. Prepare the income statement, balance sheet, and statement of cash flows for Year 1. c. What is the total amount of current liabilities at December 31, 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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Question

100%

1. The business was started when the company received $50,000 from the issue of common stock.
2 Purchased equipment inventory of $380,000 on account.
3. Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The
merchandise had a cost of $330.000.
4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 2 percent
of sales.
5. Paid the sales tax to the state agency on $400.000 of the sales.
6. On September 1, Year 1, borrowed $0,000 from the local bank. The note had a 4 percent interest rate and matured on March 1.
Year 2.
7. Paid $6.200 for warranty repairs during the year.
8. Paid operating expenses of $78,000 for the year.
9. Paid $250,000 of accounts payable.
10. Recorded accrued interest on the note issued in transaction no. 6.
Requlred
a. Record the given transactions in a horizontal statements model.
b. Prepare the income statement, balance sheet, and statement of cash flows for Year 1.
c. What is the total amount of current liabilities at December 31, Year 1?

OZARK SALES
Horizontal Statements Model
Balance Sheet
Income Statement
Assets
Liabilities
Stockholders' Equity
Event
Statement of Cash
No.
Net
Flows
Retained Revenue
Earnings
Expense
Warranty
Payable
Merchandise
Accounts
Sales Tax
Interest
Notes
Common
Income
Cash
Inventory
Payable
Payable
Payable
Payable
Stock
1.
50,000 +
50,000 +
ol =
50,000 FA
2.
380,000 =
380,000 +
За.
550,800+
40,800 +
510,000
510,000
510.000
550,800 OA
+
3b.
(330,000) =
(330,000)
330,000 = (330,000)
4.
(10,200)
10,200
(10,200)
(32,000) +
50,000 +
(32,000) OA
50,000 FA
5.
(32,000)
(32,000)
6.
50,000 +
+
7.
(8,200) +
(6,200) +
(6,200) OA
(78,000)+
(250,000)+
(78,000)|+
78,000 =
(78,000)
(78,000) OA
8.
(78,000)
(250,000) OA
(867)
9.
+
10.
667+
(667)
667 =
+
Bal.
284,600 +
50.000 =
302.000 +
8,800 +
4,000 +
667
50.000 +
50,000 +
91,133
478,000
418,887 =
91,133
284,600
Req A
Req B Inc Stmt >
++
+ ++ + +
+ +
+ + + + + +
+ +
+++ + +
+ +
+ +
++ ++ +
I | "

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