Question

The following events were completed by Dana’s Imports in September 2018:

Sept.	1	Acquired $54,000 cash from the issue of common stock.
	1	Purchased $35,000 of merchandise on account with terms 2/10, n/30.
	5	Paid $1,000 cash for freight to obtain merchandise purchased on September 1.
	8	Sold merchandise that cost $12,500 to customers for $18,000 on account, with terms 2/10, n/30.
	8	Returned $1,100 of defective merchandise from the September 1 purchase to the supplier.
	10	Paid cash for the balance due on the merchandise purchased on September 1.
	20	Received cash from customers of September 8 sale in settlement of the account balances, but not within the discount period.
	30	Paid $3,450 cash for selling expenses.

Required

1. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. The first event is recorded as an example.

2. Prepare an income statement for the month ending September 30.

3. Prepare a statement of cash flows for the month ending September 30.

A.

DANA'S IMPORTS Effect of Transactions on Financial Statements Using Horizontal Statements Model Date Balance Sheet Income Statement Statement of Cash Flows Assets = Liabilities + Stockholders’ Equity Revenue – Expenses = Net Income Cash + Accounts Receivable + Inventory = Accounts Payable + Common Stock + Retained Earnings 9/1 54,000 + + = + 54,000 + – = 54,000 FA 9/1 + + = + + – = 9/5 + + = + + – = 9/8a. + + = + + – = 9/8b. + + = + + – = 9/8c. + + = + + – = 9/10 + + = + + – = 9/20 + + = + + – = 9/30 + + = + + – = Total + + = + + – =

B.

Prepare an income statement for the month ending September 30.

	DANA'S IMPORTS Income Statement For the Month Ended September 30, 2018 Operating expenses

C.

Prepare a statement of cash flows for the month ending September 30. (Enter cash outflows as negative amounts.)

	DANA'S IMPORTS Statement of Cash Flows For the Month ended September 30, 2018 Cash flows from operating activities       Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net cash flow from financing activities Net change in cash Ending cash balance

Answer 1