The following transactions apply to Mabry Equipment Sales Corp. for 2011: 1. The business was started when

Question:

The following transactions apply to Mabry Equipment Sales Corp. for 2011:
1. The business was started when Mabry Corp. received $\$ 50,000$ from the issue of common stock.
2. Purchased $\$ 175,000$ of merchandise on account.
3. Sold merchandise for $\$ 200,000$ cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $\$ 125,000$.
4. Provided a six-month warranty on the merchandise sold. Based on industry estimates, the warranty claims would amount to 4 percent of merchandise sales.
5. Paid the sales tax to the state agency on $\$ 150,000$ of the sales.
6. On September 1, 2011, borrowed $\$ 20,000$ from the local bank. The note had a 6 percent interest rate and matures on March 1,2012.
7. Paid $\$ 5,600$ for warranty repairs during the year.
8. Paid operating expenses of $\$ 54,000$ for the year.
9. Paid $\$ 125,000$ of accounts payable.
10. Recorded accrued interest at the end of the year.
Required

a. Show the effect of these transactions on the financial statements using a horizontal statements model like the one shown here. Use a + to indicate increase, a - for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is recorded as an example.

image text in transcribed