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 $28,000 cash from the issue of common stock.
2. Purchased inventory for $22,400 cash.
3. Sold inventory costing $15,000 for $30,000 cash.

Required:

1. Record the events in a horizontal financial statements model.
2. Prepare an income statement for Year 1 (use the multistep format).
3. What is the amount of total assets at the end of the period?

Record the events in a horizontal financial statements model.

Note: 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. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells in the "Statement of Cash Flows" column may require an input - leave cells blank if there is no corresponding input needed.

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DAN WATSON MERCHANDISING

Effect of Events on Financial Statement

Event

Balance Sheet

Income Statement

Statement of Cash Flows

Assets

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Stockholders Equity

Revenue

Expenses

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Net Income

Cash

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Inventory

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Common Stock

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Retained Earnings

1.

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2.

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3a.

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3b.

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Total

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