Problem 2. Scott Company is a merchandising business that was started in 2012. S
ID: 2601982 • Letter: P
Question
Problem 2. Scott Company is a merchandising business that was started in 2012. Scott uses the perpetual inventory system. It experienced the following events during 2012.
1. Acquired $25,000 cash by issuing common stock
2. Purchased inventory on account that cost $14,000, terms 2/10, n/30
3. Sold inventory that had cost $8,400 for $15,000 cash
4. Paid for the merchandise referred to in event 2, within the discount period
Required:
1) Record the events in the financial statements model below; include column totals.
2) Prepare an income statement for 2012.
3) What is the amount of total assets at the end of 2012?
Assets
=
Liab.
+
Stockholders’ Equity
Rev.
-
Exp.
=
Net. Inc.
Cash Flow
Cash
+
Accts. Rec.
+
Inven.
=
Accts. Pay.
+
Com. Stk.
+
Ret. Earn.
1
25,000
2
3
4
Assets
=
Liab.
+
Stockholders’ Equity
Rev.
-
Exp.
=
Net. Inc.
Cash Flow
Cash
+
Accts. Rec.
+
Inven.
=
Accts. Pay.
+
Com. Stk.
+
Ret. Earn.
1
25,000
2
3
4
Explanation / Answer
1.
Income statement:
3. Total assets= 31600
Balance Sheet Event Assets Liabilities Stockholders equity Income statement Statement of cash flows Cash + Accounts receivable + Merchandise inventory = Accounts payable + Common stock + Retained earnings Revenue - Expenses = Net income 1 25000 25000 25000 Financing 2 14000 14000 3 15000 15000 15000 Operating 3 -8400 8400 4 -13720 -280 -14000 -13720 OperatingRelated Questions
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