Question

Baird Manufacturing Company experienced the folloqing events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash tramsactions and that financial statementdata are prepared in accordance with GAAP.
1.Aquired $51,000 cash by issuing common stock.
2. Paid $7,900 for the materials used to make its products, all of which were started amd completed during the year.
3. Paid salaries of $4,200 to selling and administrative employees.
4. Paid wages of $6,200 to production workers.
5. Paid $6,000 for furniture used in selling and administrative offices. The furniture was aquired on January 1. It had a $2,000 estimated salvage value and a two year useful life.
6. Paid $12,500 for manufacturing equipment. The equipment was aquired January 1. It had a $1,700 estimated salvage value and a three year useful life.
7. Sold inventory to customers for $25,000 that had cost $14,000 to make.

How these events will affect the balance sheet and income statment by recording them in a horizontal statement model.

Answer 1

Ans)

	Balance Sheet												Income Statement
	Assets								Liabilities & Equity
Event No	Cash	+	Inventory	+	Manufacturing Equip	+	Off Furniture	=	Stock	+	Retained Ear		Revenue	-	Expenses	=	Net Income
1	51,000								51,000
2	-7900		7900
3	-4200										-4200				4200		-4200
4	-6200		6200
5(i)	-6000						6000
5(ii)							-2000 (a)				-2000				2000		-2000
6(i)	-12500				12500
6(ii)			3600		-3600 (b)
7(i)	25000										25000		25000				25000
			-14000								-14000				14000		-14000
Total	39200		3700		8900		4000		51000		4800		25000		20200		4800

Calculation;

a) Depriciation- 6000-2000/2 = 2000

b) Depriciation- 12500-1700/3 = 3600