Stuart 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 $55,000 cash by issuing common stock. 2. Paid $7,200 for the materials used to make its products, all of which were started and completed during the year. 3. Paid salaries of $4,100 to selling and administrative employees. 4. Paid wages of $6,800 to production workers. 5. Paid $7,900 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,900 estimated salvage value and a three-year useful life. 6. Paid $12,700 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,300 estimated salvage value and a three-year useful life. 7. Sold inventory to customers for $26,800 that had cost $13,900 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. (Enter any decreases to account balances with a minus sign. For changes on the Statement of Cash Flows, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA).) Event No. 1 2 3 4 5a Cash + Inventory + 55,000 + + Assets +++ + + + + + Balance Sheet BV Manuf. Equip. + + + + + + BV Office Furn. = Stockholders' Equity Ret. Ear. = = = = = Common stock Prou + 55,000+ + + + Rev. Income Statement - Exp. = = = = = = Net Inc. Cash Flow 55,000 FA
Stuart 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 $55,000 cash by issuing common stock. 2. Paid $7,200 for the materials used to make its products, all of which were started and completed during the year. 3. Paid salaries of $4,100 to selling and administrative employees. 4. Paid wages of $6,800 to production workers. 5. Paid $7,900 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,900 estimated salvage value and a three-year useful life. 6. Paid $12,700 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,300 estimated salvage value and a three-year useful life. 7. Sold inventory to customers for $26,800 that had cost $13,900 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. (Enter any decreases to account balances with a minus sign. For changes on the Statement of Cash Flows, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA).) Event No. 1 2 3 4 5a Cash + Inventory + 55,000 + + Assets +++ + + + + + Balance Sheet BV Manuf. Equip. + + + + + + BV Office Furn. = Stockholders' Equity Ret. Ear. = = = = = Common stock Prou + 55,000+ + + + Rev. Income Statement - Exp. = = = = = = Net Inc. Cash Flow 55,000 FA
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:## Accounting Events for Stuart Manufacturing Company
### Overview
Stuart Manufacturing Company experienced several accounting events during its first year of operation. Except for depreciation adjustments, all transactions are cash transactions prepared in adherence to GAAP.
### Transactions
1. Acquired $55,000 cash by issuing common stock.
2. Paid $72,000 for materials to produce products, all started and completed within the year.
3. Paid $40,100 for salaries for selling and administrative employees.
4. Paid wages of $6,800 to production workers.
5. Paid $7,900 for furniture for selling and administrative offices, acquired on January 1. It had a $1,900 estimated salvage value and a three-year useful life.
6. Paid $12,700 for manufacturing equipment, acquired on January 1, with a $1,300 estimated salvage value and a three-year useful life.
7. Sold inventory for $26,800, which cost $13,900 to make.
### Requirement
Examine how these events affect the balance sheet and income statement using a horizontal financial statements model. The first event is already exemplified. Indicate operational (OA), investing (IA), or financing (FA) activities for the Statement of Cash Flows.
### Financial Statement Representation
#### Balance Sheet and Income Statement Table
- **Column Headers:**
- Assets: Cash, Inventory, BV Manufacturing Equipment, BV Office Furniture
- Stockholders' Equity: Common Stock, Retained Earnings
- Income Statement: Revenue, Expense, Net Income
- Cash Flow
- **Recorded Example (Event 1):**
- Cash: +55,000 (Increase)
- Common Stock: +55,000 (Increase in Equity)
- Cash Flow: 55,000 (FA - Financing Activity)
Each event follows a similar pattern: impacting the relevant sections of the balance sheet and income statement, determined by the type of transaction.
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