Sinclair 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 $68,000 cash by issuing common stock. 2. Paid $8,700 for the materials used to make its products, all of which were started and completed during the year. 3. Paid salaries of $4,500 to selling and administrative employees. 4. Paid wages of $10,000 to production workers. 5. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life. 6. Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a five-year useful life. 7. Sold inventory to customers for $35,000 that had cost $14,000 to make. Required 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. Note: Enter decreases to account balances with a minus sign. Event Number 1 2 3 4 5a 5b 6a 6b 7a 7b Total 68,000 + (8,700) + (4,500) + (10,000) + (9,600) + Book Value Cash + Inventory+ Manufacturing Equipment + (16,000) + + 35,000 + + 54,200 + + 8,700 + + 10,000+ + + + + + Assets (14,000) + 4,700 + Balance Sheet + + + + 16,000+ (3,000) + + 13,000 + Book Value Office Furniture = = = 9,600 = (2,000) = = = = 7,600 = Stockholders' equity Retained Earnings Common stock + 68,000 + + + + + + + + + + 68,000 + (4,500) (2,000) 35,000 (14,000) 14,500 Revenue Income Statement 35,000 35,000 - Expenses = = 4,500 = = = 2,000 = = = 14,000 = 20,500 = Net Income (4,500) (2,000) 35,000 (14,000) 14,500
Sinclair 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 $68,000 cash by issuing common stock. 2. Paid $8,700 for the materials used to make its products, all of which were started and completed during the year. 3. Paid salaries of $4,500 to selling and administrative employees. 4. Paid wages of $10,000 to production workers. 5. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life. 6. Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a five-year useful life. 7. Sold inventory to customers for $35,000 that had cost $14,000 to make. Required 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. Note: Enter decreases to account balances with a minus sign. Event Number 1 2 3 4 5a 5b 6a 6b 7a 7b Total 68,000 + (8,700) + (4,500) + (10,000) + (9,600) + Book Value Cash + Inventory+ Manufacturing Equipment + (16,000) + + 35,000 + + 54,200 + + 8,700 + + 10,000+ + + + + + Assets (14,000) + 4,700 + Balance Sheet + + + + 16,000+ (3,000) + + 13,000 + Book Value Office Furniture = = = 9,600 = (2,000) = = = = 7,600 = Stockholders' equity Retained Earnings Common stock + 68,000 + + + + + + + + + + 68,000 + (4,500) (2,000) 35,000 (14,000) 14,500 Revenue Income Statement 35,000 35,000 - Expenses = = 4,500 = = = 2,000 = = = 14,000 = 20,500 = Net Income (4,500) (2,000) 35,000 (14,000) 14,500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hansha ben
Transcribed Image Text:Problem 1-21A (Static) Effect of product versus period costs on financial statements LO 1-3
Sinclair 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 $68,000 cash by issuing common stock.
2. Paid $8,700 for the materials used to make its products, all of which were started and completed during the year.
3. Paid salaries of $4,500 to selling and administrative employees.
4. Paid wages of $10,000 to production workers.
5. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600
estimated salvage value and a four-year useful life.
6. Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and
a five-year useful life.
7. Sold inventory to customers for $35,000 that had cost $14,000 to make.
Required
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.
Note: Enter decreases to account balances with a minus sign.
Event
Number
1
2
3
4
5a
5b
6a
6b
7a
7b
Total
Cash + Inventory +
68,000 +
(8,700) +
(4,500) +
(10,000) + 10,000+
(9,600) +
||+|| -
(16,000) +
+ + +
35,000 +
54,200 +
+
8,700 +
+
+ + + + +
(14,000) +
4,700 +
Balance Sheet
Assets
Book Value
Manufacturing
Equipment
+
+
+
+
+
16,000 +
(3,000) +
+
13,000 +
Book Value
Office
Furniture
=
=
=
9,600 =
(2,000) =
7,600 =
Stockholders' equity
Retained
Earnings
Common
stock
+
68,000 +
+
+
+
+
+
+
+
+
+
68,000 +
(4,500)
(2,000)
35,000
(14,000)
14,500
Revenue
Income Statement
35,000
35,000
Expenses =
4,500 = (4,500)
2,000
Net
Income
= (2,000)
|||||
35,000
14,000 = (14,000)
20,500 =
14,500
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