Exercise 4-3A 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 $14,000 of inventory on account. Hardy sold inventory on account that cost $10,500 for $15,800. Cash payments on accounts payable were $8,800. There was $14,100 cash collected from accounts receivable. Hardy also paid $3,400 cash for operating expenses. Assume that Hardy started the accounting period with $25,000 in both cash and common stock. Required a. Identify the events described in the preceding paragraph and show them in a horizontal statements model. The first event is recorded as an example. 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. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Identify the events described in the preceding paragraph and record them in a horizontal statements model. The first event is recorded as an example. (In the Cash Flow co financing activities, "NC" for net change in cash and "NA" for not affect. Enter any decreases to account balances with a minus sign.) HARDY MERCHANDISING COMPANY Effect of Events on the Financial Statements Balance Sheet = Liabilities + Stockholders' Equity Revenue Accounts Common , Retained Inventory = Payable Stock * Earnings 25,000 Income Statement - Expenses = Net Income Assets Accounts + * Receivable Statement of Cash Flows Events + * Cash 25,000 NA Beg. bal. Pur. inv. 2a. Sold inv. 2b. Inv. cost 3. Pd. AP 4. Coll. AR 5. Pd. exp. End. bal. 25,000 + 25,000 + Required A Required B > Complete this question by entering your answers in the tabs below. Required B Required C Required D Required E Required A ---------------------- What is the balance of accounts receivable at the end of Year 1? Accounts receivable Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E What is the balance of accounts payable at the end of Year 1? Accounts payable Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E What are the amounts of gross margin and net income for Year 1? Gross margin Net income