Question

Perez 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 $57,000 cash by issuing common stock.
2. Paid $8,000 for the materials used to make its products, all of which were started and completed during the year.
3. Paid salaries of $3,600 to selling and administrative employees.
4. Paid wages of $6,100 to production workers.
5. Paid $7,400 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,400 estimated salvage value and a four-year useful life.
6. Paid $9,200 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,800 estimated salvage value and a two-year useful life.
7. Sold inventory to customers for $25,200 that had cost $13,400 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

Debit memorandum 1 Iycorte statement - Par Hulans Amount Particulars Amount To Purchase $8000 By Sales $95200 To wages $6100 By Inventory (Ilosing) $700 To Gross Profit $ 25,000 8 95,900 To selling & Administratiu 93600 By Gross Profit $ 11,800 expenses To Depreualtoy furniture 1500 equipment 3700 $5900 To Net Profit $3,000 $1,800 $11,800 -Net Profil is 8 3000 Balance dabilites Common stolla Amount $700 Net Profit sheet as on end of the year Amout Assets $57ooo Inventory at End $3000 Furniture 400 less! Depreciation (100) Equipment 89200 less! Depsenlution $370 0 85900 $550 a Cash 84 790.0 1$ 60.000 8 60ooo

working Noteca (1) Depreciation on furniture - Cost - Salvage vakre No. of years. -) 7400 – 1400 - $1500, (2) Depreciation of Equipment & Cost - Salvage value No. of years = $9200-$1800 a $3700 3. Inventory at the end & Total Manufacturing cost - cost of a Goods solde & Purchase malerial & wages - 413 400 - 2 & 8000 + $6100 - $13400 a $ 700 a