The following events were completed by Chris Toy Shop in September 2009:

Required:

a. Record each event in a statements model like the following one. 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.

d. Explain why there is a difference between net income and cash flow from operating activities.

Transcribed Image Text:

Sept. 1 Acquired $30,000 cash from the issue of common stock. 1 5 8 8 120 30 30 Purchased $22,000 of merchandise on account with terms 2/10, n/30. Paid $500 cash for freight to obtain merchandise purchased on September 1. Sold merchandise that cost $5,000 to customers for $9,500 on account, with terms 1/10, n/30. Returned $800 of defective merchandise from the September 1 purchase to the supplier. Paid cash for one-half of the balance due on the merchandise purchased on September 1. Received cash from customers of September 8 sale in settlement of the account balances, but not within the discount period. Paid the balance due on the merchandise purchased on September 1. Paid $1,950 cash for selling expenses.