A B Company (ABC) started the 2019 (Second Year of business) accounting period with the following balances: Cash 25,000, Inventory 3,000, Land 5,000, Common Stock 18,000 and Retained Earnings 15,000. During 2019, ABC experienced the following business events:

1. Purchased $16,000 of merchandise inventory on account, terms 2/10, n/30.

2. The goods that were purchased in Event 1 were delivered FOB shipping point. Freight costs of $600 were paid in cash by the responsible party.

3. Returned $500 of good purchased in Event 1.

4. Recorded the cash discount on the goods purchased in Event 1.

5. Paid the balance due on the accounts payable within the discount period.

6. Recognized $21,000 of cash revenue from the sale of merchandise.

7. Recognized $15,000 of cost of goods sold.

8. The merchandise sold in Event 6 was sold to customers FOB destination. Freight costs of $950 were paid in cash by the responsible party.

9. Paid cash of $4,000 for selling and administrative expenses.

10. Sold the land for $5,600 cash

Required:

A. Record the above transactions in a financial statement

B. Prepare a schedule of cost of goods sold

C. Prepare a multistep income statement

similar format to those pictured:

o the 2005 and 2 ot oli Walberg report in the operating activities sections What are the claims lain wat a t c h the 200 balance sheer on December 312005, and December 31. Solution to Rey The financial Cash Flow 22.000 00 - NA NA - - NA 22.000FA NA + 245.000 240.000 - NA - 248,000 NA + NA NA - NA - NA 222.000 DA M - NA + 205.000) NA - 205.000 205.000 205.000) OA (14000) NA NA NA . (14.000 NA- NA- NA (14000) FA 18,000 + RODO NA + N NA NA NA NA 11000 FA NA + A - 1350 150 - 1350 - 1 NA 43.000 + 24.000 - 18.000 + 1. 30 - 22.000 25.850245.000 - 206350 - 39.650 43.000 NC Asset, Labis, and Equity Account Balances Cary Forward Rex. & Ep. Accts. Are Cloud 13.000 + 24.000 - 18.000 + 1.150 22.000 25. O N A- NA- NA NA NA + NA - NA + 450 + N + caso N 450 (450) - (1,800) + NA - NA (1.800) + NA NA NA NA N (1.800) OA (18.000) + NA - (18.000) NA NA NA NA NA NA (18.000) FA NA + 250.000 - NA NA NA 259.000 259000 - NA - 250.000 262.000 + (262.000) - NA NA NA NA NA - NA NA 262.000 OA (211.000) + NA- NA + NA + NA+ (211.000) NA - 211,000 - (211.000) 1211.000) OA (24,000) + NA - NA + N + NA + 24.000 NA - NA - NA (24,000) FA 50,200 + 21,000 - 0 + 0 + 22.000 + 49.200 250.000 - 211.450 - 47,550 7.200 NC NA excred interest expense for 2008 - $18,000 X 10 X 912-51.350. rund interest expense for 2009 - $18,000 X 10 X 312 - $450 ution to Requirements b-g Walberg would report interest expense on the 2008 and 2009 income statements of $1,350 and 5450, respectively. Valberg made no cash interest payments in 2008. All cash for interest was paid in 2009. Walberg ould report zero cash outflow for interest on the 2008 statement of cash flows and S1,800 cash mtflow for interest on the 2009 statement. cause all revenue and expense accounts are closed at the end of each accounting period, the be- ning balances for revenue and expense accounts are always zero. total asset balance on the 2008 balance sheet would be $67,000 (Cash $43,000 + Accounts eivable $24,000). itors have a $19,350 (Note Payable $18,000 + Interest Payable $1,350) claim. Owners (in- urs) have a $47.650 (Common Stock $22,000 + Retained Earnings $25,650) claim on the as Total claims of $67,000 ($19,350 + $47,650) are equal to total assets. et cash inflow from operating activities was $49,200 (S262,000 revenue - $1,800 interest ex- - $211,000 operating expense). There were no investing activities. The net cash outflow from ng activities was $42,000 ($18,000 debt payment + $24,000 dividends). The net change in cash 7,200 cash inflow ($49,200 from operating activities - 542,000 used by financing activities). 255 Accounting for Merchandising Businesses EXHIBIT 5.12 TI Schedule of Cost of Goods Sold for 2009 Beginning inventory Purchases Purchase returns and allowances Purchase discounts Transportation in Cost of goods available for sale Ending inventory Cost of goods sold $ 6,000 11,000 (1,000) (200) 300 16,100 (4,600) $11,500 Cual or periodic inventory records. System Lecording inventory transactions ntinually (perpetually). Histori- or grocery stores no alternative cording individual decreases to gine the number of transactions erpetual records