Manufacturing cost flow across three accounting cycles The following accounting events affected Higgins Manufacturing Company during its first three years of operation. Assume that all transactions are cash transactions.

Transactions for 2006 1. Started manufacturing company by issuing common stock for $2,000.
2. Purchased $1,000 of direct raw materials.
3. Used $800 of direct raw materials to produce inventory.
4. Paid $400 of direct labor wages to employees to make inventory.
5. Applied $250 of manufacturing overhead cost to Work in Process Inventory.
6. Finished work on inventory that cost $900.
7. Sold goods that cost $600 for $1,100.
8. Paid $370 for selling and administrative expenses.
9. Actual manufacturing overhead cost amounted to $228 for the year.
Transactions for 2007 1. Acquired additional $400 of cash from common stock.
2. Purchased $1,200 of direct raw materials.
3. Used $1,300 of direct raw materials to produce inventory.
4. Paid $600 of direct labor wages to employees to make inventory.
5. Applied $320 of manufacturing overhead cost to Work in Process Inventory.
6. Finished work on inventory that cost $1,800.
7. Sold goods that cost $1,600 for $2,800.
8. Paid $500 for selling and administrative expenses.
9. Actual manufacturing overhead cost amounted to $330 for the year.
Transactions for 2008 1. Paid a cash dividend of $500.
2. Purchased $1,400 of direct raw materials.
3. Used $1,200 of direct raw materials to produce inventory.
4. Paid $440 of direct labor wages to employees to make inventory.
5. Applied $290 of manufacturing overhead cost to work in process.
6. Finished work on inventory that cost $2,000.
7. Sold goods that cost $2,200 for $3,500.
8. Paid $710 for selling and administrative expenses.
9. Annual manufacturing overhead costs were $280 for the year.
Required

a. Record the preceding events in a horizontal statements model. Close overapplied or underapplied overhead to Cost of Goods Sold. Also designate the classification of cash flows using the letters OA for operating activities, IA for investing activities, and FA for financing activities. The first event is shown as an example.

b. Prepare a schedule of cost of goods manufactured and sold, an income statement, a balance sheet, and a statement of cash flows as of the close of business on December 31, 2006.

c. Close appropriate accounts.

d. Repeat Requirements a through c for years 2007 and 2008.