Northwest Sales had the following transactions in Year 1: 1. The business was started when it acquired $68,000 cash from the issue of common stock 2. Northwest purchased $180,000 of merchandise for cash in Year 1. 3. During the year, the company sold merchandise for $196,590. The merchandise cost $108,125 Sales were made under the following terms: a. $ 47,070 Cash sales b. 144,270 Credit card sales (the credit card company charges a 1.25 percent service fee.) 5,258 Sales on account 4. The company collected all the amount receivable from the credit card company. 5. The company collected $4,830 of accounts receivable. 6. The company paid $48,015 cash for selling and administrative expenses. 7. Determined that 5.25 percent of the ending accounts receivable balance would be uncollecuble Required a. Show the effects of each of the transactions on the elements of the financial statements, using a horizontal statements model like the one shown next Use for increase for decrease, and NA for not affected. In the Cash column, indicate whether the item is an operating activity (OA), Investing activity (IA), or financing activity (FA) Use to indicate that an element was not affected by the event Event 3d indicates Cost of Goods Sold. The first transact is entered as an example (Hint: Closing entries do not affect the statements model.) tions and not them to T-accounts NORTHWEST SALES Effect of Transactions on Financial Statements Balance Sheet Income Statement Cash Flow Event No. Revenue = Liabilities + Stockholder's Equity Assets Expense = Net Income FA NA NA NA 1. NA 2. NA LA 3a. 3b. 3c. + 3d. 4 +/- 6. NA D