Problem 5

The following is a list of selected events for Unger Sales and Service for 2012. Unger uses a perpetual inventory system and had a zero inventory balance prior to these transactions.

1) Purchased merchandise on account for $67,000.

2) Sold inventory costing $48,000 for $88,000 on account.

3) Paid transportation-out cost of $1,000 on goods sold.

4) Paid salary expense of $25,000.

5) A count of the inventory revealed that there was $18,500 of inventory on hand at the end of 2012.

Required:

Answer the following questions based on the above information.

a) What was Unger's net income for 2012?

b) Compute gross margin for 2012.

c) What amount of inventory will appear on the balance sheet for 2012?

d) Prepare an income statement for 2012.

Problem 6

Hardt Corporation began business operations and experienced the following transactions during 2012:

1) Issued common stock for $10,000 cash.

2) Provided services to customers for $40,000 on account.

3) Incurred $18,000 of operating expenses on credit.

4) Collected $23,000 cash from customers.

5) Paid $15,000 on accounts payable.

Required:

a) Record the above transactions in a horizontal financial statements model to reflect their effect on Hardt's financial statements.

b) Prepare an income statement, balance sheet and statement of cash flows for 2012.