Question
Gunn Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that
Gunn Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions.
| 1. | Acquired $56,000 cash by issuing common stock. |
| 2. | Paid $7,600 for the materials used to make its products, all of which were started and completed during the year. |
| 3. | Paid salaries of $4,000 to selling and administrative employees. |
| 4. | Paid wages of $6,600 to production workers. |
| 5. | Paid $4,400 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $2,000 estimated salvage value and a two-year useful life. |
| 6. | Paid $11,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,400 estimated salvage value and a three-year useful life. |
| 7. | Sold inventory to customers for $25,100 that had cost $13,400 to make. |
| Required: |
| Show how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter decreases to account balances with a minus sign.) |
Financial Statements Model
| Assets | Equity | Income Statement | |||||||||||||||
| Event No. | Cash | + | Inventory | + | Manuf. Equip. | + | Office Furn. | = | Common stock | + | Ret. Ear. | Rev. | Exp. | = | Net Inc. | ||
| 1 | 56,000 | + | + | + | = | 56,000 | + | = | |||||||||
| 2 | + | + | + | = | + | = | |||||||||||
| 3 | + | + | + | = | + | = | |||||||||||
| 4 | + | + | + | = | + | = | |||||||||||
| 5a | + | + | + | = | + | = | |||||||||||
| 5b | + | + | + | = | + | = | |||||||||||
| 6a | + | + | + | = | + | = | |||||||||||
| 6b | + | + | + | = | + | = | |||||||||||
| 7a | + | + | + | = | + | = | |||||||||||
| 7b | + | + | + | = | + | = | |||||||||||
| Total | + | + | + | = | + | = | |||||||||||
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