Justin Swords started a small merchandising business in 2014. The business exper

Question

Justin Swords started a small merchandising business in 2014. The business experienced the following events during its first year of operation. Assume that Swords uses the perpetual inventory system. 1. Acquired $59,000 cash from the issue of common stock. 2. Purchased inventory for $27,000 cash. 3. Sold inventory costing $17,000 for $29,000 cash. Required a. Record the events in a statements model like the one shown below. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash and NA to indicate the element is not affected by the event. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.) b. Prepare an income statement for 2014 (use the multistep format). c. What is the amount of total assets at the end of the period?

Explanation / Answer

Cash Flow from Financing Activities Issue of Common Stock 59000 Cash Flow from Financing Activities 59000 Cash at the end 61000 b Income Statement Sales 29000 Cost of Goods sold 17000 Net Profit 12000 Closing Stock $10,000 27000-17000 C. Total Assets Inventory 17000 Cash 61000 59000+-27000+29000 Total Assets 78000

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