Question

The following transactions pertain to 2018, the first-year operations of Rooney Company. All inventory was started and completed during 2018. Assume that all transactions are cash transactions.

1. Acquired $4,100 cash by issuing common stock.

2. Paid $650 for materials used to produce inventory.

3. Paid $1,940 to production workers.

4. Paid $1,120 rental fee for production equipment.

5. Paid $120 to administrative employees.

6. Paid $113 rental fee for administrative office equipment.

7. Produced 350 units of inventory of which 230 units were sold at a price of $13 each.

Required

Prepare an income statement and a balance sheet in accordance with GAAP.

Walton 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 $55,000 cash by issuing common stock.
2. Paid $7,300 for the materials used to make its products, all of which were started and completed during the year.
3. Paid salaries of $3,700 to selling and administrative employees.
4. Paid wages of $6,100 to production workers.
5. Paid $5,000 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $2,000 estimated salvage value and a two-year useful life.
6. Paid $11,700 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,200 estimated salvage value and a three-year useful life.
7. Sold inventory to customers for $26,200 that had cost $13,300 to make.

Required

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 decreases to account balances with a minus sign.)

Answer 1

Rooney Company

Income Statement
Sales Revenue	$           2,990	=230*13
Cost of Goods sold	$           2,438	=(650+1940+1120)/350*230
Gross Profit	$              552
Operating Expenses	$              233	=120+113
Net Operating Income	$              319

Balance Sheet
Assets
Cash	$           3,147	=4100-650-1940-1120-120-113+2990
Inventory	$           1,272	=(650+1940+1120)/350*120
Total Assets	$          4,419
Equity
Common Stock	$           4,100
Retained Earnings	$              319
Total Equity	$          4,419

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