The following selected transactions were taken from the books of Aliceville Company for 2014:

1.

On March 1, 2014, borrowed $48,000 cash from the local bank. The note had a 8 percent interest rate and was due on September 1, 2014.

2.

Cash sales for the year amounted to $230,000 plus sales tax at the rate of 8 percent.

3.

Aliceville provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 4 percent of sales.

4.

Paid the sales tax to the state sales tax agency on $185,000 of the sales.

5.

Paid the note due on September 1 and the related interest.

6.

On October 1, 2014, borrowed $45,000 cash from the local bank. The note had a 8 percent interest rate and a one-year term to maturity.

7.

Paid $3,100 in warranty repairs.

8.

A customer has filed a lawsuit against Aliceville for $80,000 for breach of contract. The company attorney does not believe the suit has merit.

Show the effect of these transactions on the financial statements using a horizontal statements model like the one shown here. Use a + to indicate increase, a for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA) and NA for not affected. The first transaction is recorded as an example. For transaction 5, record the principal repayment in 5a and interest payment in 5b as separate entries.

ALICEVILLE COMPANY

Horizontal Statements Model

Event

Assets

=

Liabilities

+

Stockholders' Equity

Revenue

Expense

=

Net Income

Statement of Cash Flow

1.

+

=

+

+

NA

NA

NA

=

NA

+

FA

2.

=

+

=

3.

=

+

=

4.

=

+

=

5a.

5b.

6.

=

+

=

7.

=

+

=

8.

=

+

=