Problem 3

The following events pertain to Burlington Supply Company for January, 2012. The company uses the perpetual inventory method. Indicate how each of the events affects the company's financial statements, using the horizontal financial statement model.

1) Jan 3. Purchased $4,000 of merchandise inventory from supplier, Kelly Distributors, Inc. The terms of the purchase: 2/10, n/30 and FOB shipping point.

2) Jan 5. Paid $90 cash for freight to trucking company to have goods shipped from Kelly Distributors, Inc.

3) Jan 7. (a) Sold merchandise for $800 to a customer on account. (b) The merchandise sold had cost $560.

4) Jan 10. Returned $500 (list price) of defective merchandise to Kelly Distributors, Inc.

5) Jan. 11. Paid amount due to Kelly Distributors for merchandise purchased on Jan. 3.

6) Jan. 12. a) Accepted a return of $150 of the goods sold on Jan. 7. b) The cost of these goods was $110.

Problem 4

Ruthven Company had the following transactions for 2012, the first year of operations:

1) Issued common stock for $50,000 cash.

2) Purchased merchandise on account, $40,000, terms 1/10, n/30.

3) Sold merchandise on account for $25,000. The inventory sold had cost $14,000.

4) Paid for the merchandise purchased within the discount period.

5) Collected $20,000 on the merchandise sold on account.

6) Paid operating expense of $5,000.

Required:

a) What are total assets at the end of 2012?

b) What is the balance of the cash account at the end of 2012?

c) What is gross margin for 2012?

d) What is net income for 2012?

e) What are total liabilities at the end of 2012?

f) What is total equity at the end of 2012?

g) What is total retained earnings at the end of 2012?

h) What was the amount of cash flows from operating activities?