Question

During 2018, Hardy Merchandising Company purchased $18,000 of inventory on account. Hardy sold inventory on account that cost $13,500 for $20,300. Cash payments on accounts payable were $11,300. There was $18,100 cash collected from accounts receivable. Hardy also paid $3,800 cash for operating expenses. Assume that Hardy started the accounting period with $23,000 in both cash and common stock.

Required

1. 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, or NC for net change in cash. If the element is not affected by the event, leave the cell blank.

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

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

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

5. 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, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. (Not every cell will require entry. 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. 23,000 + + = + 23,000 + – = 1. + + = + + – = 2a. + + = + + – = 2b. + + = + + – = 3. + + = + + – = 4. + + = + + – = 5. + + = + + – = End. bal. + + = + + – =

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

Answer 1

Event	Cash +	Accounts	Inventory=	Accounts	Common	Retained	Revenue -	Expenses=	Net	Cashflows
		Receivable+		Payable+	Stock +	Earnings			Income
Beg. Bal	$23,000.00				$23,000.00
1			$18,000.00	$18,000.00						NA
2-a		$20,300.00				$20,300.00	$20,300.00		$20,300.00	NA
2-b			-$13,500.00			-$13,500.00		$13,500.00	-$13,500.00	NA
3	$11,300.00			-$11,300.00						-$11,300.00	Operating Activiteis
4	$18,100.00	-$18,100.00								$18,100.00	Operating Activiteis
5	-$3,800.00					-$3,800.00		$3,800.00	-$3,800.00	-$3,800.00	Operating Activiteis
End Balance	$48,600.00	$2,200.00	$4,500.00	$6,700.00	$23,000.00	$3,000.00	$20,300.00	$17,300.00	$3,000.00	$3,000.00	Net cash inflows from OA

b. Accounts receivable balance: $2200

c: Accounts payable balance = $6700

d.Gross margin = Sales-Cost of good sold '= 20300-13500=$6800
Net Income = $3000

e: Net cash provided by Operating Activities = 3000