Question

During Year 1, Hardy Merchandising Company purchased $18,000 of Inventory on account. Hardy sold Inventory on account that cost $13,500 for $20,300. Cash payments on accounts payable were $11,300. There was $18,100 cash collected from accounts receivable. Hardy also paid $3,800 cash for operating expenses. Assume that Hardy started the accounting period with $23,000 in both cash and common stock Required a. Identify the events described in the preceding paragraph and show them in a horizontal statements model. The first event is recorded as an example, b. What is the balance of accounts receivable at the end of Year 12 c. What is the balance of accounts payable at the end of Year 1? d. What are the amounts of gross margin and net income for Year 1? e. Determine the amount of net cash flow from operating activities. Complete this question by entering your answers in the tabs below. Required A Required B Required Required D Required E Identify the events described in the preceding paragraph and record them in a horizontal statements model. The first event is recorded as an example. (In the Cash Flow financing activities, "NC' for net change in cash and "NA" for not affect. Enter any decreases to account balances with a minus sign.) HARDY MERCHANDISING COMPANY Effect of Events on the Financial Statements Balance Sheet Liabilities Stockholders' Equity Revenue Accounts Common Retained Inventory Payable Stock Earnings 23,000 Income Statement Expenses - Net Income Assets Accounts Receivable Statement of Cash Flows Events Cash Beg. bal 23,000 NA 1. Purin. 2a. Sold in 2b Inv. cost 3 Pd. AP

Answer 1

HARDY MERCHANDISING COMPANY
Effect of events on the financial statements
		Balance Sheet	Income Statement	Statement of Cash Flows
		Assets	=	Liabilities	+	Stockholders Equity	Revenue	-	Expenses	=	Net Income
Events	Cash	+	Accounts Receivable	+	Inventory	=	Accounts Payable	+	Common Stock	+	Retained Earnings
	Beg. Bal.	$ 23,000.00								$      23,000.00								NA
1	Pur. Inv.					$ 18,000.00		$          18,000.00										$                                  -
2a	Sold Inv.			$                                                          20,300.00								$             6,800.00	$ 20,300.00		$ 13,500.00		$ 6,800.00	$                                  -
2b	Inv. Cost					$(13,500.00)												$                                  -
3	Pd. AP	$(11,300.00)						$        (11,300.00)										$                  (11,300.00)
4	Rec. AR	$ 18,100.00		$                                                        (18,100.00)														$                   18,100.00
5	Op. Exp.	$   (3,800.00)										$            (3,800.00)			$   3,800.00		$(3,800.00)	$                    (3,800.00)
	Total	$ 26,000.00		$                                                            2,200.00		$    4,500.00		$            6,700.00		$      23,000.00		$             3,000.00	$ 20,300.00		$ 17,300.00		$ 3,000.00	$                     3,000.00

b) Balance of account receivable at the end of year 1 = $2,200

c)  Balance of account payable at the end of year 1 = $6,700

d) Gross Margin = Revenue - Cost of goods sold

Gross Margin = 20,300 - 13,500 = $6,800

Net Income = Gross Margin - Operating Expenses

Net Income = 6,800 - 3,800 = $3,000

e) Net Cash Flow from operating activities = $3,000