Davidson Co. had the following transactions in 2017: - The business was started
ID: 2525380 • Letter: D
Question
Davidson Co. had the following transactions in 2017:
- The business was started when it acquired $200,000 in cash from the issuance of common stock
- The company purchased $900,000 of merchandise throughout the year
- During the year, the Company sold merchandise for $1,200,000 (broken out as follows):
- $ 520,000 Cash Sales
- 380,000 Credit Card Sales - The Credit Card Company charges a 4% service fee
- 300,000 Sales on Account
$ 1,200,000
- The merchandise sold was pulled from merchandise inventory and totaled $710,000
- The company collected all of the sales from the credit card receivable
- The company collected $210,000 of Accounts Receivable
- The company paid $190,000 cash for selling and administrative expenses
- Determined that 5% of the ending accounts receivable balance would be uncollectible
REQUIRED
Show the effects of each of the transactions on the elements of the financial statements, using a traditional horizontal
statements model like the one shown below.Use a "+" for an increase, "-" for a decrease and "N/A" for No effect.
Explanation / Answer
Balance Sheet
Income Statement
Statement of cash flows
Assets
Liabilities
Shareholders’ equity
Rev.
Exp.
Net inc.
Cash
Acc.rec.
Inv.
Acc. pay.
C. stock
Ret. Earn.
200000
NA
NA
NA
200000
NA
NA
NA
NA
200000 FA
NA
NA
900000
900000
NA
NA
NA
NA
NA
NA
520000
NA
NA
NA
NA
520000
520000
NA
520000
520000 OA
380000
NA
NA
NA
NA
380000
380000
NA
380000
380000 OA
15200
NA
NA
NA
NA
15200
15200
NA
15200
15200 OA
(15200)
NA
NA
NA
NA
(15200)
NA
15200
(15200)
(15200) OA
NA
300000
NA
NA
NA
300000
300000
NA
300000
NA
NA
NA
(710000)
NA
NA
(710000)
NA
710000
(710000)
NA
210000
(210000)
NA
NA
NA
NA
NA
NA
NA
210000 OA
(190000)
NA
NA
NA
NA
(190000)
NA
190000
(190000)
(190000) OA
NA
(4500)
NA
NA
NA
(4500)
NA
4500
(4500)
NA
1120000
85500
190000
900000
200000
295500
1215200
919700
295500
1120000
Note;
1. Uncollectible will be calculated as follow;
(300000 – 210000) * 0.05 = 4500
Balance Sheet
Income Statement
Statement of cash flows
Assets
Liabilities
Shareholders’ equity
Rev.
Exp.
Net inc.
Cash
Acc.rec.
Inv.
Acc. pay.
C. stock
Ret. Earn.
200000
NA
NA
NA
200000
NA
NA
NA
NA
200000 FA
NA
NA
900000
900000
NA
NA
NA
NA
NA
NA
520000
NA
NA
NA
NA
520000
520000
NA
520000
520000 OA
380000
NA
NA
NA
NA
380000
380000
NA
380000
380000 OA
15200
NA
NA
NA
NA
15200
15200
NA
15200
15200 OA
(15200)
NA
NA
NA
NA
(15200)
NA
15200
(15200)
(15200) OA
NA
300000
NA
NA
NA
300000
300000
NA
300000
NA
NA
NA
(710000)
NA
NA
(710000)
NA
710000
(710000)
NA
210000
(210000)
NA
NA
NA
NA
NA
NA
NA
210000 OA
(190000)
NA
NA
NA
NA
(190000)
NA
190000
(190000)
(190000) OA
NA
(4500)
NA
NA
NA
(4500)
NA
4500
(4500)
NA
1120000
85500
190000
900000
200000
295500
1215200
919700
295500
1120000
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