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In: Accounting

purchases and Sales of Merchandise, Cash Flows Pedal City, a bike shop, opened for business on...

purchases and Sales of Merchandise, Cash Flows

Pedal City, a bike shop, opened for business on April 1. It uses a periodic inventory system. The following transactions occurred during the first month of business:

Required:

For all accounting equations, if a financial statement item is not affected, select "No Entry" and leave the amount box blank or enter "0". If the effect is negative, use the minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.

1. Identify and analyze each of the following transactions of Pedal City.

April 1: Purchased five units from Giorgio, Inc. for $600 total, with terms 3/10, n/30, FOB destination.

How does this entry affect the accounting equation?

Balance Sheet Income Statement
Stockholders' Net
Assets = Liabilities + Equity Revenues – Expenses = Income
No Entry Accounts Payable No Entry Purchases

April 10: Paid for the April 1 purchase.

Balance Sheet Income Statement
Stockholders' Net
Assets = Liabilities + Equity Revenues – Expenses = Income
Cash Accounts Payable No Entry No Entry

April 15: Sold one unit for $200 cash.

How does this entry affect the accounting equation?

Balance Sheet Income Statement
Stockholders' Net
Assets = Liabilities + Equity Revenues – Expenses = Income
Cash No Entry Sales Revenue No Entry

April 18: Purchased ten units from Bush Enterprises for $900 total, with terms 3/10, n/30, FOB destination.

How does this entry affect the accounting equation?

Balance Sheet Income Statement
Stockholders' Net
Assets = Liabilities + Equity Revenues – Expenses = Income
No Entry Accounts Payable No Entry Purchases

April 25: Sold three units for $200 each, cash.


How does this entry affect the accounting equation?

Balance Sheet Income Statement
Stockholders' Net
Assets = Liabilities + Equity Revenues – Expenses = Income
Cash No Entry Sales Revenue No Entry

April 28: Paid for the April 18 purchase.

Activity Operating
Accounts Cash Decrease, Account Payable DecreaseCash Decrease, Account Payable Decrease
Statement(s) Balance Sheet only

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How does this entry affect the accounting equation?

Balance Sheet Income Statement
Stockholders' Net
Assets = Liabilities + Equity Revenues – Expenses = Income
Cash Accounts Payable No Entry No Entry

2. Determine net income for the month of April. Pedal City incurred and paid $100 for rent and $50 for miscellaneous expenses during April. Ending inventory is $967. (Ignore income taxes.)
$

3. Assuming that these are the only transactions during April (including rent and miscellaneous expenses), compute net cash flow from operating activities. Use the minus sign to indicate cash out flows, a decrease in cash or cash payments.
$

4. Cash outflow during the first month of business is much larger than expenses as shown on the income statement due to

Solutions

Expert Solution


ekkarill92 answered 2 years ago
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