Dan Watson started a small merchandising business in Year 1. The business experienced the following events during its first year of operation. Assume that Watson uses the perpetual inventory system.

1. Acquired $26,500 cash from the issue of common stock.

Purchased inventory for $21,200 cash.

Sold inventory costing $15,500 for $28,500 cash.

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).

Prepare an income statement for Year 1 (use the multistep format).

What is the amount of total assets at the end of the period?

\begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{15}{|c|}{ DAN WATSON MERCHANDISING } \\ \hline \multicolumn{15}{|c|}{ Effect of Events on Financial Statements } \\ \hline \multirow[b]{2}{*}{ Event } & \multicolumn{3}{|c|}{ Assets } & \multirow{2}{*}{\begin{tabular}{l} = \\ = \end{tabular}} & \multicolumn{3}{|c|}{ Stockholders' Equity } & \multirow[b]{2}{*}{ Revenue } & \multirow[b]{2}{*}{ - } & \multirow[b]{2}{*}{ Expenses } & \multirow[b]{2}{*}{=} & \multirow{2}{*}{\begin{tabular}{c} Net \\ Income \end{tabular}} & \multirow{2}{*}{\multicolumn{2}{|c|}{\begin{tabular}{c} Statement of Cas \\ Flows \end{tabular}}} \\ \hline & Cash & + & Inventory & & \begin{tabular}{l} Common \\ Stock \end{tabular} & + & \begin{tabular}{l} Retained \\ Earnings \end{tabular} & & & & & & & \\ \hline 1. & 26,500 & + & & = & 26,500 & + & & & - & & = & & & \\ \hline 2. & (21,200) & + & 21,200 & = & & + & & & - & & = & & & \\ \hline 3a. & 28,500 & + & & = & & + & & & - & & = & & & ? \\ \hline 3b. & & + & & = & & + & & & - & & = & & & \\ \hline Total & 33,800 & + & 21,200 & = & 26,500 & + & 0 & 0 & - & 0 & = & 0 & 0 & NC \\ \hline \end{tabular} NC= Net change in cash DAN WATSON MERCHANDISING Income Statement For the Year Ended December 31, Year 1 \begin{tabular}{|c|c|} \hline Retained earnings & \\ \hline & \\ \hline Gross margin & 0 \\ \hline Operating expenses & \\ \hline Net income & $ \\ \hline \end{tabular}