Question

Please help answer the parts that are red.

The following trial balance pertains to Benji's Grocery as of January 1, 2018: Account Title Cash Beginning Balances $28,000 4,400 54,000 Accounts receivable Merchandise inventory Accounts payable Common stock Retained earnings 4,400 47,000 35,000 The following events occurred in 2018. Assume that Benji's uses the periodic inventory method. 1. Purchased land for $9,400 cash. 2. Purchased merchandise on account for $100,000, terms 2/10, n/45. 3. Paid freight of $1,200 cash on merchandise purchased FOB shipping point. 4. Returned $4,000 of defective merchandise purchased in Event 2. 5. Sold merchandise for $90,000 cash. 6. Sold merchandise on account for $96,000, terms 3/10, n/30. 7. Paid cash within the discount period on accounts payable due on merchandise purchased in Event 2. 8. Paid $12,000 cash for selling expenses. 9. Collected $54,000 of the accounts receivable from Event 6 within the discount period. 10. Collected $42,000 of the accounts receivable but not within the discount period. 11. Paid $6,800 of other operating expenses. 12. A physical count indicated that $48,000 of inventory was on hand at the end of the accounting period. Required: a. Record the preceding transactions in a horizontal statements model. In the Cash Flows column, use OA to designate operating activity, IA for investing activity, FA for financing activity, or NC for net change. If the account is not affected by the event, leave the cell blank. The beginning balances have been recorded as an example. b. Prepare a schedule of cost of goods sold and an income statement.

Answer 1

1. Horizontal Statements Model -

BENJI'S GROCERY Horizontal Statements Model Balance Sheet Income Statement = + Event Statement of Cash Flow Expenses Net Income Cash + Assets Merchandise + Inventory $ 54,000 + Land = Liabilities Accounts Payable $ 4,400 Accounts Receivable $ 4,400 + Stockholder's Equity Common Retained Revenue Stock Earnings $ 47,000 $ 35,000 + Bal. $ 28,000 $ (9,400) 1 $ 9,400 $ (9,400) IA 2 $ 100,000 $ 100,000 3 $ (1,200) $ 1,200 $ (1,200) $ (1,200) OA 4 $ (4,000) $ (4,000) 5 $ 90,000 OA $ 90,000 $ 96,000 6 $ 96,000 $ (1,920) 7.1 7.2 8 $ (1,920) $ (94,080) OA $ (94,080) $ (12,000) $ 12,000 OA $ 90,000 $90,000 $ 96,000 $ 1,920 $(94,080) $ (12,000) $(12,000) $ (1,620) $ 52,380 $ 42,000 $ (6,800) $ (6,800) $ (102,000) 9.1 $ (1,620) 9.2 $ (1,620) $ (52,380) $ (42,000) $ 52,380 $ 42,000 $ (6,800) OA OA 10 11 OA $ 6,800 $ 102,000 12 $ (102,000) Total $ 88,900 + $ 4,400 + $ 48,000 + $ 9,400 = $ 4,400 + $ 47,000 + $ 35,000 $184,380 $120,080 = $ 64,300

2. Schedule of Cost of Good Sold -

BENJI'S GROCERY Schedule of Cost of Good Sold For the Year Ended December 31, 2018 Beginning Inventory 1/1/2018 $ 54,000 Purchase Discount $ (1,920) Transporation-In $ 1,200 Purchase Return and Allowances $ (4,000) Purchases $ 100,000 Cost of Good Available for Sale Ending Inventory Cost of Good Sold $ 149,280 $ (48,000) $ 101,280

3. Income Statement -

BENJI'S GROCERY Income Statement For the Year Ended December 31, 2018 Revenue Sales Revenue $ 186,000 Sales Discount $ (1,620) Net Sales $ 184,380 Cost of Goods Sold $(101,280) Gross Margin $ 83,100 Operating Expenses Selling Expense $ (12,000) Other Operating Expense $ (6,800) Total Operating Expense $ (18,800) Operating Income $ 64,300