1. The business was started when it acquired $51,000 cash from the issue of common stock....

1.	The business was started when it acquired $51,000 cash from the issue of common stock.
2.	Northwest purchased $171,000 of merchandise for cash in 2016.
3.	During the year, the company sold merchandise for $199,490. The merchandise cost $109,720. Sales were made under the following terms:


a.	$	45,950	Cash sales
b.		142,080	Credit card sales (The credit card company charges a 1.25 percent service fee.)
c.		11,460	Sales on account

The company collected all the amount receivable from the credit card company.

The company collected $10,543 of accounts receivable.

The company paid $43,494 cash for selling and administrative expenses.

Determined that 4.50 percent of the ending accounts receivable balance would be uncollectible.

c.	Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2016. (Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign. Round your answers to the nearest whole dollar.)

Solutions

Expert Solution

All working forms part of the answer
Amounts are in $
Journal Entries for balances

General Journal	Dr ($)	Cr ($)	Working , if any
Cash	51000		[received]
Common Stock		51000

Inventory	171000		[purchased]
Cash		171000

Cash	186254		[45950 + (142080-1.25%]
Accounts receivables	11460		[given]
Charges	1776		[142080 x 1.25%]
Sales Revenue		199490

Cost of Goods Sold	109720		[given]
Inventory		109720

Cash	10543		[cash received]
Accounts receivables		10543

Selling & administrative expenses	43494
Cash		43494

Bad Debt expenses	41		[11460-10543] x 4.5%
Allowances for doubtful accounts		41

Income Statement

Sales Revenue	199490
(-) Cost of Goods Sold	109720
Gross Profits	$89770
(-) Charges	1776
(-) Bad debt expenses	41
(-) Selling & admin expenses	43494
Net Income	$44,459

Statement of changes in Equity

	Common Stock	Retained Earnings	Total Stockholder's equity
Beginning Balance	0	0	0
Add: Issue	51000		51000
Add: Net Income		44459	44459
Ending cash balance	$51000	$44459	$95459

Balance Sheet

ASSETS
Current Assets:
Cash [51000-171000+186254+10543-43494]		33303
Inventory		61280
Accounts receivables	917
Less: Allowance for doubtful accounts	41	876
Total Current Assets/ASSETS		$95,459

LIABILITIES & STOCKHOLDERS Equity
Common Stock	51000
Retained Earnings	44459
Total Liabilities & Stockholder's Equity		$95,459

Cash Flow Statement

Net Income	44459
Increase in Inventory	-61280
Increase in Accounts receivables	-876
A. Cash flow from Operating Activities		-17697

B. Cash flow from Investing Activity		0

Cash flow from Financing Activity
Issue of Common Stock	51000
C. Cash flow from Financing activities		51000
Increase in Cash		$33,303
Add: Beginning cash balance		0
Cash at the end		$33,303

ekkarill92 answered 1 year ago

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