1-21A (Algo) Effect of product versus period costs on financial statements LO 1-3 Benson 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 $54,000 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 $4,000 to selling and administrative employees. 4. Paid wages of $7,000 to production workers. 5. Paid $5,000 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,700 estimated salvage value and a three-year useful life. 6. Paid $8,400 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,200 estimated salvage value and a two-year useful life. 7. Sold inventory to customers for $25,400 that had cost $13,600 to make. Required 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 decreases to account balances with a minus sign.) Balance Sheet Answer is not complete. Event Assets Equity No. Cash Inventory Manuf. Equip. Office Furn. Common stock Ret. Rev. Income Statement Exp. Ear. Net Inc. 1 54,000 + + + 54,000 + - 2 (7.400) 7,400 . + 3 (4,000) + + + (4,000) 4,000 - (4,000) 4 (7,000) + 7,000+ + + - 5a (5,000) 6 + 5,000 - + 5b + + (1,000) + (1,000) (8,400) + 8,400 4 6b) + + (3,600) + + (3,600) - 3,600 7a + + + 25,400 - 1,000- (1,000) (3,600) ( 25,400 ( 7b + (13,600)+ + (13,600) - Total 22,200 + 800 + 4,800 + 4,000 = 54,000 + (22,200) 25,400 - 8,600 16,800 Balance Sheet Answer is not complete. entory Assets Manuf. Equip. Income Statement Office Furn. Common stock Equity Ret. Rev. Ear. Exp. Net Inc. + . + = 54,000 + 7,400 + + = + - + + = + (4,000) 4,000 S (4,000) 7,000 + + = + + + 5,000 = + - + + (1,000) = + (1,000) - 1,000 = (1,000) + 8,400 + = + + (3,600) + = + (3,600) 3,600= (3,600) + 25,400 = 25,400 ( + + 13,600) + + = + (13,600) = 800 + 4,800 + 4,000 = 54,000 + (22,200) 25,400 8,600 = 16,800