The following transactions apply to Ozark Sales for Year 1: 1. The business was started when the company received $49,000 from the issue of common stock. 2. Purchased equipment inventory of $176,500 on account. 3. Sold equipment for $207,000 cash (not including sales tax). Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $132,000. 4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 4 percent a of sales. 5. Paid the sales tax to the state agency on $157,000 of the sales. 6. On September 1, Year 1, borrowed $21,000 from the local bank. The note had a 6 percent interest rate and matured on March 1, Year 2. 7. Paid $5,500 for warranty repairs during the year. 8. Paid operating expenses of $53,000 for the year. 9. Paid $124,400 of accounts payable. 10. Recorded accrued interest on the note issued in transaction no. 6. Required a. Record the given transactions in a horizontal statements model. b. Prepare the income statement, balance sheet, and statement cash flows for Year 1. c. What is the total amount of current liabilities at December 31, Year 1? OZARK SALES Horizontal Statements Model Income Statement Balance Sheet Liabilities + Event No. Statement of Cash Flows Accounts Warranty Revenue Expense + Sales Tax Payable + Payable Net Income Interest Payable Notes Payable Stockholders' Equity Common Retained Stock Earnings 49.000 Assets Merchandise Cash + Inventory 49,000+ 0 0 II 176,500 221,490 (132,000) b) Payable + + = 49,000FA + 176,500 + + * + 14,490 + = + + + + 1. 2. . 3b. 4. 5. 3. 6. 6 7. 207.000 207.000 ( (132,000) (8.280) ( = 132,000 8,280 207.000 (132,000) ( (8.280) + + + (8,280) + I + = + (10,990) + + 1+ L + 221,490OA 0 0 (10.990) OA 21,000FA (5,500) OA (53.000) OA ( (124.400)OA + = + - 21,000 (10.990) + 21,000+ (5,500) (53,000) + (124,400) + = + + - (5,500) + + 11 B. = + + + + 53,000 = (53,000) + = (124400) + + + + 9. 10. Bal. (53,000) (124.400) X (1.260) X (111.940) + = + + + 1+ 1,260 x 1.260 1,260 x = 194,540 (1.280) X 12.480 97,600 + 44,500 = 52.100 + 3,500 (13,780) 21,000 49,000 + 207,000 97,600 REGA Reg B Inc Stmt > OZARK SALES Income Statement For the Year Ended December 31, Year 1 Sales revenue $207,000 Cost of goods sold 132,000 Gross margin 75,000 Expenses Operating expenses $ 53,000 $ Warranty expenses 8,280 Total operating expenses Operating income Interest expense (61,280) 13,720 1,260 Net income $ 12,460 OZARK SALES Balance Sheet As of December 31, Year 1 Assets Cash Merchandise inventory S 98,000 44,500 $ 142,500 Total assets Liabilities Interest payable Accounts payable Notes payable Warranties payable Sales tax payable 1,260 X 52,500 21,000 2.780 3,500 S 81,040 Total liabilities Stockholders' equity Common stock Retained earnings 49,000 12,460 Total stockholders' equity Total liabilities and stockholders' equity S S 61,460 S 142,500 lo OZARK SALES Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities Inflow from customers $ 207.000 Inflow from sales tax 14,490 Outflow for expenses (58,500) Outflow for sales tax (10.990) Outflow to purchase inventory (124.000) ( $ 28,000 Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Inflow from loan Inflow from stock issue 21,000 49,000 70,000 98,000 Net cash flows from financing activities Net change in cash Plus: Beginning cash balance Ending cash balance $ 98,000 Total current liabilities $ 81,040