Exercise 4-3B Effect of inventory transactions on the income statement and statement of cash flows: perpetual system During Year 1, Rondor Merchandising Company purchased $40,000 of inventory on account. The company sold inventory on account that cost $30,000 for $50,000. Cash payments on accounts payable were $24,500. There was $38,000 cash collected from accounts receivable. Rondor also paid $9,000 cash for operating expenses. Assume that Rondor started the accounting period with $20,000 in both cash and common stock. Required a. Identify the events described in the preceding paragraph and record them in a horizontal financial statements model like the following one: Balance Sheet Income Statement Assets Llab. + Stk. Equity Statement of Cash Flows Cash + Accts. Rec. + Inv. Accts. Pay. +Com. Stk. + Ret. Earn. 20,000 + NA + NA= NA + 20,000 + NA Rev. Exp. Net Inc. NA NA= NA NA 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. f. Explain any differences between net income and net cash flow from operating activities. Rondor Merchandising Company Effect of Events on the Financial Statements Assets Balance Sheet Liab. +Stkholders' Equity +A. Rec. +Mdse. Inv. A. Pay. +C. Stk. +Ret. Ear. Income Statement Cash Flows Rev. Exp. Net Inc. Events Beg. Bal. 1. Pur. Inv. Cash 20,000+ 2a. Sold Inv. 2b. Inv. Cost 3. Pd. AP 4. Coll. AR 5. Pd. Exp. End. Bal. NA+ b. Accts. receivable: $ C. Accts. Payable: $ d. Gross margin: $ NA = NA +20,000+ NA NA NA NA NA 11,000 4,500 NC e. Cash Flows From Operating Activities: Net Cash Flow from Operating Activities $ f. Revenue amounted to $50,000, but only $38,000 was Expenses actually amounted to $39,000, but only $33,500 of the expenses were Explain the difference in the two statements: