Question

Gibson Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared In accordance with GAAP. 1. Acquired $56,000 cash by Issuing common stock. 2. Pald $7,300 for the materials used to make its products, all of which were started and completed during the year. 3. Pald salaries of $3,700 to selling and administrative employees. 4. Paid wages of $6,300 to production workers. 5. Pald $4,400 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 two-year useful life. 6. Pald $12,500 for manufacturing equipment. The equipment was acquired on January 1. It had a $1.100 estimated salvage value and a three-year useful life. 7. Sold Inventory to customers for $25,300 that had cost $13,600 to make. Required Indicate how these events would affect the balance sheet and Income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (1A), financing activity (FA), or leave the cell blank If there is no effect.) Income Statement Assets Manuf Inventory - Equip Financial Statements Model Equity Office Common Furn. stock 56,000 + Cash Ret. Rev. - Exp. Net Inc. Cash flow No. 1 56.000 + 56,000 FA 56.000 56,000 56,000

Answer 1

5b depreciation calculation = ($4,400 - $1,600)/2 = 6b depreciation calculation = ($12,500 - $1,100)/3 = $ 1,400 $ 3,800 assets income statement financial statements model equity office common + ret. Ear. furn. stock $ 56,000 + cash manuf. Equip inventoryl + rev. exp. net inc. cash flow $ 7,300 + + + $ (3,700) - $ 3,700 = $ 6,300 + + event + no. 1 $ 56,000 + 2 $ (7,300)| + 3 $ (3,700)| + 4 $ (6,300)| + 5a $ (4,400)| + 5b 6a $ (12,500) 6b 7a $ 25,300 + 7b + total $ 47,100 + + $ $ 4,400 = (1,400) = + + $ 1,400 $ (1,400) = $ 56,000FA $ (7,300)| OA $ (3,700) $ 3,700 | OA $ (6,300)| OA $ (4,400) IA $ (1,400) $(12,500) IA $ (3,800) $ 25,300 $ 25,300 OA $(13,600) $ 2,800 $ 54,500 + + $ $ 12,500 (3,800) + $ 3,800 $25,300 + + + + $ (3,800) $ 25,300 $(13,600) $ 2,800 = = = = - - - $(13,600)| + $0 + $13,600 $22,500 $ 8,700 + $ 3,000 = $ 56,000 $25,300

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