Question

The company started when it acquired $38,000 cash by issuing common stock. Purchased a new cooktop that cost $14,200 cash. Earned $23,400 in cash revenue. Paid $12,500 cash for salaries expense. Adjusted the records to reflect the use of the cooktop. Purchased on January 1, Year 1, the cooktop has an expected useful life of five years and an estimated salvage value of $3,500. Use straight-line depreciation. The adjusting entry was made as of December 31, Year 1.

Required:
Record the above transactions in a horizontal statements model like the following one. (In the Cosh Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA),a financing activity (FA) and net change in cash (NC). The letters NA indicate that an element is not affected by the event. Enter any decreases to account balances and cash outnows with。 minus sign.) Horizoetal Statements Model Balance Sheet Income Statement Statement of Cash Flows Event Assets Equity Common R Revenue -Expense Net Income Cash Equipment Bal

Answer 1

Horizontal Statements Model

Balance Sheet Income Statement Statement of

Assets = Liabilities + Equity Revenue - Expenses = Profit Cash Flows

1. +$38,000)= 0 + $38,000 FA

2. +$14,200-$14,200 = L + E IA

3. +$23,400 = L + E +$23,400 - $23,400 OA

4. -$12,500 = L + E - $12,500 -12,500 OA

5. -$2,140 = L + E - $2,140 - 2,140 None

Total $46,760 = Liabilities + $38,000 + $8,760

Where A = assets

L = Liabilities

E = Equity

Step-by-step explanation:

a) Data and Analysis:

Cash $38,000 Common stock $38,000

Cooktop $14,200 Cash $14,200

Cash $23,400 Sales revenue.

Cash $12,500 Salaries expense $12,500

Depreciation $2,140 ($14,200 - $3,500)/5