Brief Exercise $3-2($Algo$)$ Effect of purchase returns on the horizontal financial statements model LO $3-2$

Marcus Xavier noticed that many small rural towns did not have retail sporting goods outlets. To address this need, Marcus created

Xavier Sporting Goods. The business experienced the following events during its first year of operation.

Acquired $$68,000$ cash from the issue of common stock.

On February $1,$ Year $1,$ Xavier Sporting Goods purchased merchandise inventory for $$33,000$ on account from True Sports

Incorporated.

On February $15,$ Year $1,$ Xavier Sporting Goods returned $$14,000$ worth of merchandise inventory to True Sports Incorporated.

Required:

Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of

cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify

the cash flows as operating activities $($OA$),$ investing activities $($IA$),$ or financing activities $($FA$).$ The first transaction is shown as an

example.

Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed.