Question

Fanning 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 $52,000 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 $3,800 to selling and administrative employees. 4. Paid wages of $6,900 to production workers. 5. Paid $8,300 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,100 estimated salvage value and a four-year useful life. 6. Paid $11,100 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,500 estimated salvage value and a three-year useful life. 7. Sold inventory to customers for $26,400 that had cost $13,000 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

= Balance Sheet Income Statement Assets Equity Event Manuf. Office Common No. Cash Inventory Equip. Furn. Stock Ret. Ear. Rev. Exp. = Net Income 1 $ 52,000 = $ 52,000 $ $ 2 $ -8,000 $ 8,000 $ = $ 3 $ -3,800 $ -3,800 $ 3,800 $ -3,800 4 $ -6,900 $ 6,900 $ = $ 5a $ -8,300 $ 8,300 = $ $ 5b $ -1,800 = $ -1,800 $ 1,800 $ -1,800 ба $ -11,100 $ 11,100 $ $ $ 3,200 $ -3,200 $ = $ $ 26,400 $ 26,400 $26,400 = $ 26,400 $ -13,000 $ -13,000 $ 13,000 $ -13,000 Total $ 40,300 $ 5,100 $ 7,900 $ 6,500 = $ 52,000 $ 7,800 $26,400 $ 18,600 $ 7,800 = 6b = 7b = 5b 6b Depreciation on Office furniture (8300-1100)/4 Depreciation on Manuf. Equipment (11100-1500)/3 ***Depreciation on Manuf. Equipment is categorized as production cost

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