Answered step by step
Verified Expert Solution
Question
1 Approved Answer
10-23A (Algo) Effect of product versus period costs on financial statements LO 10-2, 10-3 Gibson Manufacturing Company experienced the following accounting events during its first
10-23A (Algo) Effect of product versus period costs on financial statements LO 10-2, 10-3 Gibson Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared in accordance with GAAP, 1. Acquired $57,000 cash by issuing common stock. 2. Paid $7,400 for the materials used to make its products, all of which were started and completed during the year. 3. Paid salaries of $4,200 to selling and administrative employees. 4. Paid wages of $6,600 to production workers. 5. Paid $3,900 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,500 estimated salvage value and a two-year useful life. 6. Paid $8,400 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,600 estimated salvage value and a two-year useful life. 7. Sold inventory to customers for $25,900 that had cost $13,700 to make. Required Indicate how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. For changes on the Statement of Cash Flows, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA).) Required Indicate how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. For changes on the Statement of Cash Flows, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA).) Balance Sheet Income Statement Event No. Assets Stockholders' Equity Cash Flow Cashi +Inventory + BV Manuf. Equip. BV Office Common Ret. Rev. Furn. stock Exp. Net Inc. Ear. 1 57,000+ . + = 57,000+ 57,000 FA 2 + "O + 3 + 4 5b 66 7a 7b " Total 57,000 0 0 57,000+ 0 0 0 0 57,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started