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Finch Manufacturing Company experienced the following accounting events during its first year of operation. With the...

Finch Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared in accordance with GAAP.

  1. Acquired $58,000 cash by issuing common stock.
  2. Paid $7,100 for the materials used to make its products, all of which were started and completed during the year.
  3. Paid salaries of $3,500 to selling and administrative employees.
  4. Paid wages of $6,600 to production workers.
  5. Paid $5,700 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,800 estimated salvage value and a three-year useful life.
  6. Paid $12,400 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,600 estimated salvage value and a three-year useful life.
  7. Sold inventory to customers for $25,400 that had cost $13,500 to make.

Required

Indicate how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA), or leave the cell blank if there is no effect.)

Financial Statements Model
Assets Equity Income Statement
Event No. Cash + Inventory + Manuf. Equip. + Office Furn. = Common stock + Ret. Ear. Rev. – Exp. = Net Inc. Cash flow
1 58,000 + + + = 58,000 + – = 58,000 FA
2 not attempted + not attempted + not attempted + not attempted = not attempted + not attempted not attempted – not attempted = not attempted not attempted not attempted
3 not attempted + not attempted + not attempted + not attempted = not attempted + not attempted not attempted – not attempted = not attempted not attempted not attempted
4 not attempted + not attempted + not attempted + not attempted = not attempted + not attempted not attempted – not attempted = not attempted not attempted not attempted
5a not attempted +not attempted not attempted +not attempted not attempted +not attempted not attempted =not attempted not attempted +not attempted not attempted not attempted –not attempted not attempted =not attempted not attempted not attempted not attempted
5b not attempted +not attempted not attempted +not attempted not attempted +not attempted not attempted =not attempted not attempted +not attempted not attempted not attempted –not attempted not attempted =not attempted not attempted not attempted not attempted
6a not attempted +not attempted not attempted +not attempted not attempted +not attempted not attempted =not attempted not attempted +not attempted not attempted not attempted –not attempted not attempted =not attempted not attempted not attempted not attempted
6b not attempted +not attempted not attempted +not attempted not attempted +not attempted not attempted =not attempted not attempted +not attempted not attempted not attempted –not attempted not attempted =not attempted not attempted not attempted not attempted
7a not attempted +not attempted not attempted +not attempted not attempted +not attempted not attempted =not attempted not attempted +not attempted not attempted not attempted –not attempted not attempted =not attempted not attempted not attempted not attempted
7b not attempted +not attempted not attempted +not attempted not attempted +not attempted not attempted =not attempted not attempted +not attempted not attempted not attempted –not attempted not attempted =not attempted not attempted not attempted not attempted
Total 58,000 + 0 + 0 + 0 = 58,000 + 0 0 – 0 = 0 58,000

Solutions

Expert Solution

Amount in $
Assets Equity Income Statement
Event No. Cash + Inventory + Manuf. Equip. + Office Furn. = Common stock + Ret. Ear. Rev. – Exp. = Net Inc. Cash flow
1    58,000 + + + =                 58,000 + – =          58,000 FA
2    -7,100 +         7,100 + + = + – =           -7,100 OA
3    -3,500 + + + = +    -3,500 –     3,500 =    -3,500           -3,500 OA
4    -6,600 +         6,600 + + = + – =           -6,600 OA
5a    -5,700 + + +            5,700 = + – =           -5,700 IA
5b * + + +           -1,300 = +    -1,300 –     1,300 =    -1,300 OA
6a -12,400 + +               12,400 + = + – =        -12,400 IA
6b** +         3,600 +                -3,600 + = + – = OA
7a    25,400 + + + = +    25,400                       25,400 – =    25,400          25,400 OA
7b +     -13,500 + + = + -13,500 – 13,500 = -13,500 OA
Total 48,100 +        3,800 +                 8,800 +            4,400 =                58,000 +      7,100                       25,400 – 18,300 =      7,100          48,100
* (5,700 - 1,800 ) /3
** (12,400 - 1,600 ) /3

ekkarill92 answered 2 years ago
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