On January 1, 2021, Tom R started a business The company had the following accounting events during the first year of operation.

1. Started the business by issuing common stock for $250,000 on account. cash.

2. Paid $197,500 cash to purchase inventory.

3. Sold merchandise that cost $100,000 for $225,000 on the account.

4. Paid $50,000 for operating expenses.

5. Wrote off $15,000 of inventory

6. Collected $200,000 cash from accounts receivable

REQUIRED

1. Record the preceding transactions in the horizontal statements model. 2. Prepare an income statement, a balance sheet, and a statement of cash flows. 3. Since Tom R sold inventory for $ 225,000 he will be able to recover more than 20% of the

$ 250,000 he invested in the stock. Do you agree with this statement? Why or why not?

Hint : Think Net Income generated by business activity in the period compared to the original investment