Question

Acquired $70,000 cash from the issue of common stock. Purchased $61,000 of inventory on account. Received goods purchased in Event 2 FOB shipping point; freight cost of $1,870 paid in cash. Sold inventory on account that cost $51,000 for $97,000. Freight cost on the goods sold in Event 4 was $1,020. The goods were shipped FOB destination. Cash was paid for the freight cost. Customer in Event 4 returned $4,540 worth of goods that had a cost of $2,320. Collected $79,540 cash from accounts receivable. Paid $56,200 cash on accounts payable. Paid $3,020 for advertising expense. Paid $4,050 cash for insurance expense. Required a. Which of these events affect period (selling and administrative) costs? Which result in product costs? If neither, label the transaction NA. b. Record each event in a horizontal statements model. The first event is recorded as an example. (In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash, and NA to indicate the element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus sign.)

Answer 1

selling and administrative
Freight cost on the goods sold in Event 4 was $1,020. The goods were shipped FOB destination. Cash was paid for the freight cost.	1020
Paid $3,020 for advertising expense.	3020
Paid $4,050 cash for insurance expense.	4050
Total selling and administrative	8090
product costs
Sold inventory on account that cost $51,000 for $97,000.	51000
Customer in Event 4 returned $4,540 worth of goods that had a cost of $2,320.	-2320
Net cost of goods sold	48680

	assets			liability	equity		income statement			cash flow statements
	cash	inventory	account receivable	account payable	common stock	retained earning	revenue	expense	net income
Acquired $70,000 cash from the issue of common stock.	70000				70000					70000	FA
Purchased $61,000 of inventory on account.		61000		61000						0	NA
Received goods purchased in Event 2 FOB shipping point; freight cost of $1,870 paid in cash.	-1870	1870								-1870	OA
Sold inventory on account that cost $51,000 for $97,000.		-51000	97000			46000	97000	51000	46000	0	NA
Freight cost on the goods sold in Event 4 was $1,020. The goods were shipped FOB destination. Cash was paid for the freight cost.	-1020					-1020		1020	-1020	-1020	OA
Customer in Event 4 returned $4,540 worth of goods that had a cost of $2,320.		2320	-4540			-2220	-4540	-2320	-2220	0	NA
Collected $79,540 cash from accounts receivable	79540		-79540							79540	OA
Paid $56,200 cash on accounts payable	-56200			-56200						-56200	OA
Paid $3,020 for advertising expense.	-3020					-3020		3020	-3020	-3020	OA
Paid $4,050 cash for insurance expense.	-4050					-4050		4050	-4050	-4050	OA
Total	83380	14190	12920	4800	70000	35690	92460	56770	35690	83380	NC