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 $33,000 cash from the issue of common stock.
2. Purchased inventory for $26,400 cash.
3. Sold inventory costing $15,600 for $30,000 cash.

Required a. Record the events in a horizontal statement model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. b. Prepare an income statement for Year 1 (use the multistep format). c. What is the amount of total assets at the end of the period?

DAN WATSON MERCHANDISING

Effect of Events on Financial Statement

Event

Assets

=

Stockholders Equity

Revenue

Expenses

=

Net Income

Statement of Cash Flows

Cash

+

Inventory

=

Common Stock

+

Retained Earnings

1.

+

=

+

=

2.

+

=

+

=

3a.

+

=

+

=

3b.

+

=

+

=

Total

0

+

0

=

0

+

0

0

0

=

0

0

DAN WATSON MERCHANDISING
Income Statement
For the Year Ended December 31, Year 1
	0

Total assets