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The following transactions apply to Ozark Sales for Year 1:

The business was started when the company received $49,000 from the issue of common stock.
Purchased equipment inventory of $176,500 on account.
Sold equipment for $203,000 cash (not including sales tax).
Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $128,000.
Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 3 percent of sales.
Paid the sales tax to the state agency on $153,000 of the sales.
On September 1, Year 1, borrowed $20,000 from the local bank. The note had a 6 percent interest rate and matured on March 1, Year 2.
Paid $5,500 for warranty repairs during the year.
Paid operating expenses of $53,500 for the year.
Paid $124,200 of accounts payable.
Recorded accrued interest on the note issued in transaction no. 6.

Prepare the income statement, balance sheet, and statement of cash flows for year 1.

Respuesta :

Answer and Explanation:

According to the scenario, The presentation of the each financial statement is presented below:

                                                    Income Statement

Particular                                         Amount ($)

Sales                                                    203,000

Less - merchandise cost                    128,000

Gross Profit                                              75,000

Less-Operating expenses paid             53,500

Less-Paid warranty repairs                       5,500

Less-Provision for warranty($203,000 ×3%) 6,090

Less-interest expenses($20,000 × 6% × 4 ÷ 12) 400

Net Income                                                   9510

                                              Balance Sheet

Assets        Amount ($)               Liabilities

                                                     & stockholder’s equity Amount ($)

Cash        92,300                       Accounts payable

                                                          ($176,500-$124,200)     52,300

Merchandise

inventory

($176,500-$128,000)  48,500    Sales tax payable

                                                          {($203,000 × 7%) - $10,710}  3,500

                                              Warranty payable 6,090

                                               Interest payable 400

                                               Notes payable 20,000

                                               Common stock equity 49,000

                                               Retained earnings 9,510

Total              140,800                              Total            140,800

                                                  Cash Flow Statement

Particular                                                                 Amount($)

Cash flow from operating activities:-  

Cash receipt from sale                                                   217,210

Less - Paid accounts payable                                  -124,200

Less - Sales tax paid                                                  -10,710

Less - Paid warranty repairs                                           -5,500

Less - paid operating expenses                                  -53,500

Total amount of Cash flow from operating activities 23,300

Cash flow from investing activities:-  

Cash flow from financing activities:-  

Issue of common stock                                                        49,000

Add-Borrowing from local bank                                      20,000

Total amount of Cash flow from financing activities        69,000

Net increase in cash                                                        92,300

Opening cash balance                                                               -

Ending cash balance                                                           92,300

Working note:

Total Cash  Amount

Particulars                                                            Amount ($)

Amount received from issue of common stock        49,000

Add-Sold equipment $203,000 + ($203,000 × 7%) 217,210

Less-Sales tax paid to the state agency ($153,000 × 7%) 10,710

Add-Borrowed from local bank                                       20,000

Less-Paid warranty repairs                                               5,500

Less-Paid operating expenses                                    53,500

Less-Paid accounts payable                                            124,200

Net cash                                                                          92,300

                                  Retained Earnings

Particulars                                                 Amount ($)

Sold equipment                                       203,000

Less-Merchandise cost                              128,000

Less-Paid warranty repairs                        5,500

Less-Paid operating expenses              53,500

Less-interest expenses                              400

Less-Provision for warranty                       6,090

Net Retained earnings                               9,510

These are items of the financial statement i.e listed above

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