The Pet Store experienced the following events for the 2018 accounting period: A

Question

The Pet Store experienced the following events for the 2018 accounting period: Acquired $75,000 cash from the issue of common stock 2. Purchased $73,500 of inventory on account 3. Received goods purchased in Event 2 FOB shipping point, freight cost of $1,790 paid in cash. 4. Sold inventory on account that cost $39,000 for $73,000 5. Freight cost on the goods sold in Event 4 was $1,030. The goods were shipped FOB destination. Cash was paid for the freight cost 6. Customer in Event 4 returned $4,700 worth of goods that had a cost of $2.400. 7. Collected $59,860 cash from accounts receivable. 8. Paid $60,200 cash on accounts payable 9. Paid $3,560 for advertising expense 10. Paid $3,860 cash for insurance expense. Required a. Which of these events affect period (selling and administrative) costs? Which result in product costs? If neither, label the transaction b. Record the above events in a horizontal statement model. In the Cash Flow column, use OA to designate operating activity, IA for NA. 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 beginning balances have been recorded as an example.

Explanation / Answer

Period cost and product cost

Transaction Cost 1 NA 2 Product cost 3 Product cost 4 Product cost 5 Period cost 6 Product cost 7 NA 8 NA 9 Period cost 10 Period cost

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