Question

The following trial balance pertains to Benji’s Grocery as of January 1, 2018:

Account Title	Beginning Balances
Cash		$	22,000
Accounts receivable			3,200
Merchandise inventory			42,000
Accounts payable			3,200
Common stock			35,000
Retained earnings			29,000

The following events occurred in 2018. Assume that Benji’s uses the periodic inventory method.

1. Purchased land for $8,200 cash.

2. Purchased merchandise on account for $88,000, terms 1/10, n/45.

3. Paid freight of $600 cash on merchandise purchased FOB shipping point.

4. Returned $2,800 of defective merchandise purchased in Event 2.

5. Sold merchandise for $78,000 cash.

6. Sold merchandise on account for $78,000, terms 2/10, n/30.

7. Paid cash within the discount period on accounts payable due on merchandise purchased in Event 2.

8. Paid $10,800 cash for selling expenses.

9. Collected $42,000 of the accounts receivable from Event 6 within the discount period.

10. Collected $36,000 of the accounts receivable but not within the discount period.

11. Paid $5,600 of other operating expenses.

12. A physical count indicated that $46,800 of inventory was on hand at the end of the accounting period.

Required:

1. 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.

2. Prepare a schedule of cost of goods sold and an income statement.

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. (Not every cell will require entry. Enter any decreases to account balances and cash outlfows with a minus sign.)

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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. (Not every cell will require entry. Enter any decreases to account balances and cash outlfows with a minus sign.)

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BENJI'S GROCERY

Horizontal Statements Model

Event Balance Sheet Income Statement Statement of Cash Flows

Assets = Liabilities + Stockholders’ Equity Revenue – Expenses = Net Income

Cash + Accounts Receivable + Merchandise Inventory + Land = Accounts Payable + Common Stock + Retained Earnings

Bal. 22,000 + 3,200 + 42,000 + = 3,200 + 35,000 + 29,000 – =

1. (8,200) + 0 + 0 + 8,200 = + + – = (8,200)

IA

2. 0 + 0 + 88,000 + = 88,000 + + – =

3. (600) + 0 + 600 + = + + – 0 = (600)

OA

4. 0 + 0 + (2,800) + = + + – 0 =

5. 78,000 + 0 + 0 + = + + 78,000 78,000 – = 78,000 78,000

OA

6. 0 + 78,000 + 0 + = + + 78,000 78,000 – = 78,000

7a. (84,348) + 0 + 0 + = (84,348) + + – = (84,348)

OA

7b. 0 + (852) + + = + + – =

8. (10,800) + 0 + 0 + = + + (10,800) – 10,800 =

OA

9a. 41,160 + + 0 + = + + – =

OA

9b. 0 + + 0 + = + + – =

OA

10. 36,000 + (36,000) + 0 + = + + – =

OA

11. (5,600) + 0 + 0 + = + + (5,600) – =

OA

12. 0 + 0 + + = + + – =

OA

Total $67,612 + $44,348 + $127,800 + $8,200 = $6,852 + $35,000 + $168,600 $156,000 – $10,800 = $156,000 $(15,148)

OA

Answer 1

Event Balance Assets = Liabilities + Common Stock +retained Earnings Account Merchandise Accounts Retained Cash Receivable Inventory Land payable Common Stock Earnings 22000 3200 42000 0 3200 35000 29000 - 8200 8200 -8200 88000 88000 1 IA 2 3 -600 600 OP -600 4 -2800 -2800 5 78000 78000 78000 OA 6 78000 78000 ОА 7a 78000 -84348 -84348 -84348 OP 7b -852 852 OP 852

7b -852 852 ОР 8 -10800 OP 9а 852 -10800 -10800 41160 41160 -41160 ОР 9b -860 -860 -36000 ОР 10 ОР 11 -860 36000 36000 -5600 -5600 ОР -5600 12 -81000 -81000 ОР -80400 Total 67612 3180 46800 8200 3200 35000 87592

Statement of Cost of Goods Sold Total Purchase 127800 Less Discount -852 Less Cl. Inventory -46800 Cost of Goods Sold 80148) 155140 -80148 Income Statement Sales 156000 Less Discount -860 Net Sales Less Cost of Goods Sold Gross profit Op. Exps. Selling Exps. 10800 Op. Exps. 5600 Total Net Income 74992 -16400 58592