rcise 9-8A Current liabilities Exe ollowing transactions apply to Ozark Sales fo

Question

rcise 9-8A Current liabilities Exe ollowing transactions apply to Ozark Sales for 2016: 1. The e business was started when the company received $50,000 from the issue of common stock. 2, Purchased equipment inventory of $380,000 on account. a Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $330,000. rovided a six-month warranty on the equipment sold. Based on industry estimates, the 4. P 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, 2016, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, 2017, 7. Paid $6,200 for warranty repairs during the year. 8. Paid operating expenses of $78,000 for the year. 9. Paid $250,000 of accounts payable. 10. Recorded accrued interest on the note issued in transaction no. 6. Required a. Show the effect of these transactions on the financial statements using a horizontal statements model like the one shown here. Use + for increase,-for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is recorded as an example

Explanation / Answer

SOLUTION:

Event Assets = Liabilities + Equity Revenue - Exp. = Net Income Cash Flow 1 +50,000 = NA + +50,000 NA NA NA FA 2 +380,000 = +380,000 + NA NA NA NA NA 3a. +550,800 = +40,800 + NA +510,000 NA NA OA 3b. -330,000 = NA NA NA +330,000 NA NA 4 NA 10,200 NA NA +10,200 NA NA 5 -32,000 = -32,000 NA NA NA NA OA 6 +50,000 = +50,000 NA NA NA NA FA 7 -6,200 = -6,200 NA NA NA NA OA 8 -78,000 = NA NA NA +78,000 NA OA 9 -250,000 = -250,000 NA NA NA NA OA 10 NA +667 NA NA +667 NA NA

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