Question

Acquired $34,500 cash from the issue of common stock. Purchased inventory for $27,600 cash. Sold inventory costing $15,400 for $31,000 cash. Required a. Record the events in general journal format. b. Post the entries to T-accounts. c. Determine the amount of gross margin. d. What is the amount of net cash flow from operating activities for Year 1

Answer 1

a. General Journal Format:

Accounts Titles Debit Credit

Cash $34,500

Common stock $34,500

To record the issue of common stock for cash.

Inventory $27,600

Cash $27,600

To record the purchase of inventory for cash.

Cash $31,000

Sales revenue $31,000

To record the sale of goods for cash.

Cost of goods sold $15,400

Inventory $15,400

To record the cost of goods sold.

b. T-accounts:

Cash

Accounts Titles Debit Credit

Common stock $34,500

Inventory $27,600

Sales revenue 31,000

Common stock

Accounts Titles Debit Credit

Cash $34,500

Inventory

Accounts Titles Debit Credit

Cash $27,600

Cost of goods sold $15,400

Sales revenue

Accounts Titles Debit Credit

Cash $31,000

Cost of goods sold

Accounts Titles Debit Credit

Inventory $15,400

c. Gross margin:

Sales revenue $31,000

Cost of goods sold 15,400

Gross margin $15,700

d. Net Cash Flow from operating activities for Year 1:

Cash from customers $31,000

Cash paid to suppliers (27,500)

Net cash flow from

operating activities $3,500

Step-by-step explanation:

a) Data and Analysis of Transactions:

Cash $34,500 Common stock $34,500

Inventory $27,600 Cash $27,600

Cost of goods sold $15,400 Inventory $15,400

Cash $31,000 Sales revenue $31,000