Question

In: Accounting

Davidson Co. had the following transactions in 2017: - The business was started when it acquired...

Davidson Co. had the following transactions in 2017:

- The business was started when it acquired $200,000 in cash from the issuance of common stock
- The company purchased $900,000 of merchandise throughout the year
- During the year, the Company sold merchandise for $1,200,000 (broken out as follows):
- $ 520,000 Cash Sales
- 380,000 Credit Card Sales - The Credit Card Company charges a 4% service fee
- 300,000 Sales on Account
$ 1,200,000
- The merchandise sold was pulled from merchandise inventory and totaled $710,000
- The company collected all of the sales from the credit card receivable
- The company collected $210,000 of Accounts Receivable
- The company paid $190,000 cash for selling and administrative expenses
- Determined that 5% of the ending accounts receivable balance would be uncollectible

REQUIRED
Show the effects of each of the transactions on the elements of the financial statements, using a traditional horizontal
statements model like the one shown below.Use a "+" for an increase, "-" for a decrease and "N/A" for No effect.

Solutions

Expert Solution

Balance Sheet

Income Statement

Statement of cash flows

Assets

Liabilities

Shareholders’ equity

Rev.

Exp.

Net inc.

Cash

Acc.rec.

Inv.

Acc. pay.

C. stock

Ret. Earn.

200000

NA

NA

NA

200000

NA

NA

NA

NA

200000 FA

NA

NA

900000

900000

NA

NA

NA

NA

NA

NA

520000

NA

NA

NA

NA

520000

520000

NA

520000

520000 OA

380000

NA

NA

NA

NA

380000

380000

NA

380000

380000 OA

15200

NA

NA

NA

NA

15200

15200

NA

15200

15200 OA

(15200)

NA

NA

NA

NA

(15200)

NA

15200

(15200)

(15200) OA

NA

300000

NA

NA

NA

300000

300000

NA

300000

NA

NA

NA

(710000)

NA

NA

(710000)

NA

710000

(710000)

NA

210000

(210000)

NA

NA

NA

NA

NA

NA

NA

210000 OA

(190000)

NA

NA

NA

NA

(190000)

NA

190000

(190000)

(190000) OA

NA

(4500)

NA

NA

NA

(4500)

NA

4500

(4500)

NA

1120000

85500

190000

900000

200000

295500

1215200

919700

295500

1120000

Note;

1. Uncollectible will be calculated as follow;

(300000 – 210000) * 0.05 = 4500

ekkarill92 answered 2 years ago
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