Northwest Sales had the following transactions in Year 1: 1. Acquired $200,000 cash from the issue of common stock. 2. Purchased $900,000 of merchandise for cash in Year 1. 3. Sold merchandise that cost $710,000 during the year under the following terms: $520,000 Cash sales 380,000 Credit card sales (The credit card company charges a 4 percent service fee.) 300,000 Sales on account (Record each part of the transaction on a separate line.) 4. Collected all the amount receivable from the credit card company. 5. Collected $210,000 of accounts receivable. 6. Paid selling and administrative expenses of $190,000. 7. Determined that 5 percent of the ending accounts receivable balance would be uncollectible. Required a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. Prepare an income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flows for Year 1. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record th into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed. NORTHWEST SALES Balance Sheet Horizontal Statements Model Income Statement Assets = Stockholders' Equity Statement of Cash Events Net Realizable Value of Merchandise Cash Accounts Inventory Common Stock + Retained Earnings Revenue Expenses = Net Income Flows Receivable 1. 200,000 + + 200,000 + 2. (900,000) + 900,000 = + 3a. + 490,000 + = 3b. 520,000+ + 3c. + 380,000+ 200,000 (900,000) + 490,000 1,200,000 (710,000) = 0 = + 520,000 520,000 = + 380,000 380,000 520,000 520,000 380,000 3d. + + 4. + + = + 5. 210,000+ (210,000) + = + 6. (190,000) + + (190,000) (190,000) = (190,000) (190,000) 7. + + = + Balance (160,000) + 660,000 + 900,000 = 200,000 + 1,200,000 2,100,000 (900,000) = 710,000 (370,000) NC * NC = Net change in cash Prepare an income statement for Year 1. NORTHWEST SALES Income Statement For the Year Ended December 31, Year 1 Operating expenses Total operating expenses 0 Prepare a statement of changes in stockholders' equity for Year 1. NORTHWEST SALES Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 1 Beginning common stock Ending common stock Beginning retained earnings $ 0 EA Ending retained earnings 0 Total stockholders' equity $ 0 Prepare a balance sheet for Year 1. Note: Be sure to list the assets in the order of their liquidity. NORTHWEST SALES Balance Sheet For the Year Ended December 31, Year 1 Assets Total assets Liabilities Stockholders' equity 0 $ 0 Total stockholders' equity 0 Total liabilities and stockholders' equity $ 0 Prepare a statement of cash flows for Year 1. Note: Cash outflows should be indicated with a minus sign. NORTHWEST SALES Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net cash flow from financing activities Net change in cash Ending cash balance $ 0 0 $ 0