Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below. The following transactions apply to Ozark Sales for 2018: 1. The business was started when the company received $50,000 from the issue of co 2. Purchased equipment inventory 3. Sold equipment for S510000 cash (not including sales tax) Sales tax of 8 percent is collected when the merchandise is 4. Provided a six-month warranty on the equipment sold. Based on industry estimates of $380,000 on account The merchandise had a cost of $330,000. , the warranty claims would amount to 2 percent of sales 5. Paid the sales tax to the state agency on $400,000 of the sales 6. On September 1, 2018, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, 2019. 7. Paid $6,200 for warranty repairs during the year 8. Paid operating expenses of $78,000 for the year 9. Paid $250000 of accounts payable. 10. Recorded accrued interest on the note issued in transaction no. 6.

Explanation / Answer

Trial Balance Particulars Dr. Amt. Cr. Amt. Cash              284,600 Inventory - Equipment                50,000 Accounts Payable              130,000 Interest Payable                      667 Sales Tax Payable                  8,800 Warranty expense Payable                  4,000 Notes Payable - Short Term                50,000 Common Stock                50,000 Sales              510,000 Cost of Goods Sold              330,000 Warranty expense                10,200 Operating Expense                78,000 Interest Expense                      667 Total              753,467              753,467                         -   Answer. OZARK SALES Income Statement For the Year Ended Dec 31, 2018 Sales              510,000 Cost of Goods Sold              330,000 Gross Margin              180,000 Expenses: Warranty Expense                10,200 Operating Expense                78,000 Total Expenses                88,200 Net Operating Income                91,800 Interest Expense                      667 Net Income                91,133 OZARK SALES Statement of Retained Earnings For the Month Ended Dec 31, 2018 Beginning Balance                         -   Net Operating Income                91,133 Sub-total                91,133 Dividends                         -   Ending Balance, Dec 31                91,133 OZARK SALES Balance Sheet As of Dec 31, 2018 Assets Current Assets Cash              284,600 Inventory - Equipment                50,000              334,600 Property, Plant & Equipment                         -   Total Assets              334,600 Liabilities & Stockholders' Equity Liabilities Current Liabilities Accounts Payable              130,000 Interest Payable                      667 Sales Tax Payable                  8,800 Warranty expense Payable                  4,000 Notes Payable - Short Term                50,000              193,467 Long Term Liabilities                         -   Total Liabilities              193,467 Stockholders' Equity Common Stock                50,000 Retained Earnings                91,133 Total Stockholders' Equity              141,133 Total Liabilities & Stockholders' Equity              334,600 OZARK SALES Statement of Cash Flows (Indirect Method) For the Year Ended Dec 31, 2018 Cash Flow from opearating activities: Net Income                91,133 Add/(Less) non cash effects on operating activities Increase in Inventory - Equipment              (50,000) Increase in Accounts Payable              130,000 Increase in Interest Payable                      667 Increase in Sales Tax Payable                  8,800 Increase in Warranty Expense Payable                  4,000                93,467 Net Cash provided by operating activities              184,600 Cash flow from Investing Activities                         -   Cash Flow from Financing Activities Issue of Common Stock                50,000 Proceeds from Notes Payable (Short Term)                50,000 Net Cash provided by Financing activities              100,000 Net Increase / (Decrease) in Cash              284,600 Cash balance at the beginning - Jan 1                         -   Cash balance at the end - Dec 31, 2018              284,600

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