Question

Typewritten answers only, please, no handwritten answers. Thank you.

During 2018, Hardy Merchandising Company purchased $15,000 of inventory on account. Hardy sold inventory on account that cost $11,300 for $16,900. Cash payments on accounts payable were $9,400. There was $15,000 cash collected from accounts receivable. Hardy also paid $3,500 cash for operating expenses. Assume that Hardy started the accounting period with $24,500 in both cash and common stock.

Required

Record the events in a horizontal statement model. 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. The beginning balances have been recorded as an example.

What is the balance of accounts receivable at the end of 2018?

What is the balance of accounts payable at the end of 2018?

What are the amounts of gross margin and net income for 2018?

Determine the amount of net cash flow from operating activities.

Record the events in a horizontal statement model. 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. The beginning balances have been recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.

HARDY MERCHANDISING COMPANY Effect of Events on the Financial Statements Event Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenue – Expenses = Net Income Statement of Cash + Accounts Receivable + Inventory = Accounts Payable + Common Stock + Retained Earnings Cash Flows Beg. bal. 24,500 + + = + 24,500 + – = NA 1. + + = + + – = 2a. + + = + + – = 2b. + + = + + – = 3. + + = + + – = 4. + + = + + – = 5. + + = + + – = End. bal. $24,500 + $0 + $0 = $0 + $24,500 + $0 $0 – $0 = $3,700 $0

Prepare an income statement for 2018 (use the multistep format).

DAN WATSON MERCHANDISING Income Statement For the Year Ended December 31, 2018 0 Operating expenses $0 What is the balance of accounts receivable, accounts payable, amounts of gross margin, net income and net cash flow from operating activities at the end of 2018? (Indicate cash outflows with minus sign.) b. Accounts receivable c. Accounts payable d. Gross margin Net income e. Net cash flow from operating activities Typewritten answers only, please, no handwritten answers. Thank you.

Answer 1

Hardy Merchandising Company

Effect of events on financial statements

Balance Sheet

Income Statement

Statement of cash flows

Assets

=

Liabilities

+

Shareholder's Equity

Revenue

-

Expense

=

Net Income

Cash

+

Inventory

+

Accounts receivable

=

Accounts payable

+

Common Stock

+

Retained Earnings

-

=

Beg.

$      24,500.00

+

+

+

$                               -

=

+

$          24,500.00

+

$                   -

$                      -

-

$                     -

=

$                     -

N/A

1

+

$    15,000.00

+

=

$ 15,000.00

+

+

-

=

N/A

2a

+

+

$                16,900.00

=

+

+

$   16,900.00

$      19,600.00

-

=

$     19,600.00

N/A

2b

+

$ (11,300.00)

+

=

+

+

$ (11,300.00)

-

$      11,300.00

=

$   (11,300.00)

N/A

3

$      (9,400.00)

+

+

=

$   (9,400.00)

+

+

-

=

$-­9,400.00

OA

4

$      15,000.00

+

+

$              (15,000.00)

=

+

+

-

=

$ 15,000.00

OA

5

$      (3,500.00)

+

+

=

+

+

$   (3,500.00)

-

$        3,500.00

=

$     (3,500.00)

$-3,500.00

OA

End.

$      26,600.00

+

$      3,700.00

+

$                  1,900.00

=

$      5,600.00

+

$          24,500.00

+

$      2,100.00

$      19,600.00

-

$      14,800.00

=

$        4,800.00

$    2,100.00

NC

Hardy Merchandising Company
Income Statement
For the Year Ended December 31, 2018
Sales revenue		$ 16,900.00
Less: Cost of Goods sold		$ 11,300.00
Gross profit		$    5,600.00
Operating expenses		$    3,500.00
Net income		$    2,100.00

Balances as asked

b.	Accounts receivable		$ 1,900.00
c.	Accounts payable		$ 5,600.00
d.	Gross margin		$ 5,600.00
	Net income		$ 2,100.00
e.	Net cash flow from operating activities		$ 2,100.00