Exercise 4-3A (Algo) Effect of inventory transactions on the income statement and statement of cash flows: Perpetual system LO 4-1 During Year 1, Hardy Merchandising Company purchased $27,000 of inventory on account. Hardy sold inventory on account that cost $20,300 for $30,400. Cash payments on accounts payable were $16,900. There was $27,100 cash collected from accounts receivable. Hardy also paid $4,700 cash for operating expenses. Assume that Hardy started the accounting period with $21,500 in both cash and common stock. 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, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. b. What is the balance of accounts receivable at the end of Year 1? c. What is the balance of accounts payable at the end of Year 1? d. What are the amounts of gross margin and net income for Year 1? e. Determine the amount of net cash flow from operating activities. 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 the element is not affected by the event, leave the cell blank. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with HARDY MERCHANDISING COMPANY Effect of Events on the Financial Statements Balance Sheet Income Statement Event Cash Assets Accounts Receivable Inventory Beg 21,500 bal Liabilities Stockholders' Equity Accounts Payable Common Stock Retained Earnings Revenue Expenses 21,500 1. 27,000 27,000+ 2. . 30,400 30,400 30,400- 2b . (20,300) - . + (20,300) 20,300- 3. (16,900) (16,900) + M 4. 5 27,000+ (4,700) (27,000). + = + + N 14 + (4,700) 4,700 End. $ 26,900 15 3,400 . s 6,700 $ 10,100 21,500 . 5,400 $ 30,400 bal T $ 25,000 nate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If y. Enter any decreases to account balances and cash outflows with a minus sign.) ANDISING COMPANY the Financial Statements Stockholders' Equity hon ck Retained Earnings Revenue 1,500 + Income Statement Net Statement of Cash Flows Expenses Income = NA + = + 30,400 30,400 = 30,400 + (20,300) 20,300 = (20,300) + = (16,900) OA + 27,000 OA (4,700) 4,700 = (4,700) (4,700) OA $ 5,400 $ 30,400 $ 25,000 $ 5,400 $ 5,400 NC 21,500 + What is the balance of accounts receivable, accounts payable, amounts of gross margin, net income and net cash flow from operating activities at the end of Year 1? (Indicate cash outflows with minus sign.) b. Accounts receivable Accounts payable d. Gross margin Net income $ 10,100