Effect of accounting events on financial statements Required Use a horizontal statements model to show how each

Question:

Effect of accounting events on financial statements

Required

Use a horizontal statements model to show how each of the following independent accounting events affects the elements of the balance sheet and the income statement. Indicate whether the event increases (I), decreases (D), or does not affect (NA) each element of the financial statements. The first two transactions are shown as examples.

a. Paid cash to purchase raw materials.

b. Recorded cash sales revenue.

c. Applied overhead to Work in Process Inventory based on the predetermined overhead rate.

d. Closed the Manufacturing Overhead account when overhead was underapplied.

e. Recognized cost of goods sold.

f. Recognized depreciation expense on manufacturing equipment.

g. Purchased manufacturing supplies on account.

h. Sold fully depreciated manufacturing equipment for the exact amount of its salvage value.

Balance Sheet Income Statement Event No. Exp. Liab. + C. Stk + Ret Ear. Net Inc. %3! Assets Rev. %3! NA NA NA a. ID NA N

Financial Statements
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Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...