Problem 3-22A (Algo) Effect of purchase returns and allowances and purchase discounts on the financial statements: Perpetual system LO 3-2, 3-3 The following events were completed by Dana's Imports in September, Year 1: Sept. 1 Acquired $53,000 cash from the issue of common stock. 1 Purchased $34,500 of merchandise on account with terms 2/10, n/30. 5 Paid $950 cash for freight to obtain merchandise purchased on September 1. 8 Sold merchandise that cost $12, 250 to customers for $17,500 on account, with terms 2/10, n/30. 8 Returned $1,0se of defective merchandise from the September 1 purchase to the supplier. 10 Paid cash for the balance due on the merchandise purchased on September 1. 20 Received cash from customers of September 8 sale in settlement of the account balances, but not within the discount period. Required 30 Paid $3,400 cash for selling expenses. a. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. The first event is recorded as an example. b. Prepare an income statement for the month ending September 30. c. Prepare a statement of cash flows for the month ending September 30. Required A Required B Required C Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investme change in cash. If the element is not affected by the event, leave the cell blank. The first event is recorded as an example. (Not every cell will re- and cash outflows with a minus sign.) DANA'S IMPORTS Effect of Transactions on Financial Statements Using Horizontal Statements Model Balance Sheet Income Statement Assets Date Cash Accounts Receivable Inventory Liabilities + Accounts Payable Stockholders' Equity Common Stock Retained Earnings Revenue Expenses Net Income Statement of Cash Flows 9/1 53,000 . 53,000+ 53,000 FA 9/1 4 95 9/8a. Bb 9/Bc 9/10 920 9/30 Total $53.000- $ $ 0+ $ 53,000+ $ 05 $ 0 $53,000 Required A Required B Required C Prepare an income statement for the month ending September 30. DANA'S IMPORTS Income Statement For the Month Ended September 30, Year 1 Net sales Cost of goods sold Gross margin Operating expenses Selling and administrative expense Net income $ 17,000 10,250 6,750 3,300 $ 3,750 Required A Required B Required C Prepare a statement of cash flows for the month ending September 30. (Cash out sign.) DANA'S IMPORTS Statement of Cash Flows For the Month ended September 30, Year 1 Cash flows from operating activities Inflow from customers Outflow for inventory Outflow for selling and administrative expense Net cash flow from operating activities Cash flows from investing activities: $ 17,000 (45,050) (3,000) Cash flows from financing activities: Inflow from stock issue 45,000 Net cash flow from financing activities Net change in cash Plus: Beginning cash balance Ending cash balance $ (31,050) 0 45,000 13,950 0 $ 13,950