Problem 1 21A Effect of product versus period costs on financial statements Sinclair 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 and that financial statement data are prepared in accordance with GAAP Acquired $68,000 cash by issuing common stock Paid $8,700 for the materials used to make its products, all of which were started and completed during the year Paid salaries of $4,500 to selling and administrative employees Paid wages of $10,000 to production workers Page 38 Paid $9,600 for furniture used in selling and administrative offices The furniture was acquired on January 1 It had a $1,600 estimated salvage value and a four year useful life Paid $16,000 for manufacturing equipment The equipment was acquired on January 1 It had a $1,000 estimated salvage value and a five year useful life Sold inventory to customers for $35,000 that had cost $14,000 to make Required Explain 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 Balance Sheet Income Statement Assets Equity Event Manuf Office Com Ret No Cash Inventory Equip Furn Stk Ear Rev Exp Net Inc 68,000 NA NA NA 68,000 NA NA NA NA Record accumulated depreciation as negative amounts in these columns

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Problem 1-21A Effect of product versus period costs on financial statements Sinclair Manufacturing Company experienced the following accounting events during its first year of operation.

Problem 1-21AEffect of product versus period costs on financial statements

Sinclair 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 and that financial statement data are prepared in accordance with GAAP.

Acquired $68,000 cash by issuing common stock.
Paid $8,700 for the materials used to make its products, all of which were started and completed during the year.
Paid salaries of $4,500 to selling and administrative employees.
Paid wages of $10,000 to production workers.
Page 38
Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life.
Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a five-year useful life.
Sold inventory to customers for $35,000 that had cost $14,000 to make.

Required

Explain 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.

Balance Sheet Income Statement Assets Equity Event Manuf. Office Com. Ret. No. Cash + Inventory + Equip.* + Furn. Stk. + Ear. Rev. - Exp. = Net Inc. 68,000 + NA + NA + NA = 68,000 + NA NA - NA = NA Record accumulated depreciation as negative amounts in these columns