Product cost flow and financial statements Spencer Manufacturing began business on January 1, 2007. The following events pertain to its first year of operation.

1. Acquired $1,800 cash by issuing common stock.

2. Paid $600 cash for direct raw materials.

3. Transferred $500 of direct raw materials to Work in Process Inventory.

4. Paid production employees $700 cash.

5. Applied $325 of manufacturing overhead costs to Work in Process Inventory.

6. Completed work on products that cost $1,100.

7. Sold products for $1,600 cash.

8. Recognized cost of goods sold from Event No. 7 of $875.

9. Paid $450 cash for selling and administrative expenses.

10. Paid $350 cash for actual manufacturing overhead costs.

11. Made a $100 cash distribution to owners.

12. Closed the Manufacturing Overhead account.

Required

a. Record the preceding events in a horizontal statements model. 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.