Question

Check my work Required Information [The following information applies to the questions displayed below.] The following transactions apply to Ozark Sales for Year 1: 1. The business was started when the received $50,000 from the issue of common stock 2. Purchased equipment inventory of $380,000 on company account. 3. Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $330,000. 4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 2 percent of sales. 5. Paid the sales tax to the state agency on $400,000 of the sales. 6. On September 1, Year 1, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, Year 2. 7. Paid $6,200 for warranty repairs during the year. 8. Paid operating expenses of $78,000 for the year. 9. Paid $250,000 of accounts payable. 10. Recorded accrued interest on the note issued in transaction no. 6.

Answer 1

b-1. Income Statement OZARK SALES Income Statement For the Year Ended December 31, Year 1 Sales Revenue Less: Cost of goods Sold Gross Margin Expenses Operating Expenses Warranty Expenses Total Operating Expenses Operating Income Interest Expenses Net Income $510,000 -$330,000 $180,000 -$78,000 -$10,200 -$88,200 $91,800 -$667 $91,133

b-2. Balance Sheet OZARK SALES Balance She et As of December 31, Year 1 Assets Cash $284,600 $50,000 $334,600 Merchandise Inventory Total Assets Liabilities Accounts Payable $130,000 $8,800 $50,000 $4,000 $667 Sales Tax Payable Notes Payable Warranties payable Interest Payable Total Liabilities Stockholder's Equity Common Stock Retained Eamings Total Stockholder's Equity Total Liabilities & Stockholder's Equity $193,467 $50,000 $91,133 $141,133 $334,600

b-3. Statement of Cash Flows OZARK SALES Statement of Cash Flows For the year ended December 31, Year 1 Cash Flows from Operating Activities: Inflow from Customers Inflow from Sales Tax Outflow of Expenses ($78,000 $6,200) -$84,200 Outflow of Sales tax Outflow of Inventory Purchased Net cash flow from operating activities Cash Flows from Investing Activities: Cash Flows from Financing Activities: Inflow from Loan Inflow from Stock Issued Net cash flow from Financing activities Net Change in Cash Add: Beginning Cash Balance Ending Cash Balance $510,000 $40,800 -$32,000 -$250,000 $184,600 $0 $50,000 $50,000 $100,000 $284,600 $0 $284,600