Chapter 3, Problem 3E

Exercise 3-3 Effect of inventory transactions on financial statements: Perpetual system

Dan Watson started a small merchandising business in 2018. The business experienced the following events during its first year of operation. Assume that Watson uses the perpetual inventory system.

1. Acquired $30,000 cash from the issue of common stock.

2. Purchased inventory for $18,000 cash.

3. Sold inventory costing $15,000 for $32,000 cash.

Required

a. Record the events in a statements model like the one shown here.

b. Prepare an income statement for 2018 (use the multistep format).

c. What is the amount of total assets at the end of the period?