Chateau Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, all transactions are cash transactions.

1. Acquired \($67,000\) cash by issuing common stock.

2. Paid \($9,500\) for the materials used to make products, all of which were started and completed during the year.

3. Paid salaries of \($5,300\) to selling and administrative employees.

4. Paid wages of \($6,200\) to production workers.

5. Paid \($9,600\) for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a \($1,600\) estimated salvage value and a four-year useful life.

6. Paid \($27,000\) for manufacturing equipment. The equipment was acquired on January 1. It had a \($3,000\) estimated salvage value and a three-year useful life.

7. Sold inventory to customers for \($38,000\) that had cost \($20,000\) to make.

Required:
Explain how these events would affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. In the Cash Flow column, indicate whether the amounts represent financing activities (FA), investing activities (IA), or operating activities (OA).

Transcribed Image Text:

Assets Event Manuf. Office No. Cash + Inventory + Furn.* + Equip.* 1 67,000 = Equity Com. Ret. Stk. + Earn. Rev. - Exp. = Net Inc. Cash Flow 67,000 67,000 FA