Question

The Pet Store experienced the following events for the Year 1 accounting period: 1. Acquired $60,000 cash from the issue of common stock. 2. Purchased $65,000 of inventory on account. 3. Received goods purchased in Event 2 FOB shipping point; freight cost of $900 paid in cash. 4. Sold inventory on account that cost $38,000 for $71,000. 5. Freight cost on the goods sold in Event 4 was $620. The goods were shipped FOB destination. Cash was paid for the freight cost. 6. Customer in Event 4 returned $4,200 worth of goods that had a cost of $2,150. 7. Collected $58,300 cash from accounts receivable. 8. Paid $59,200 cash on accounts payable. 9. Paid $2,600 for advertising expense. 0. Paid $3,100 cash for insurance expense. Required a. Which of these events affect period (selling and administrative) costs? Which result in product costs? If neither, label the transaction NA. Transaction Cost 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Answer 1

Net Income Revenues Expenses Statement of Cash flows Liabilities Stockholder's Equity Accounts payable + Common Stock + Retained Earnings $ 60,000+ $ 65,000 + $ 900 + + Q1 | Transaction Cost 1 NA 2 Product cost 3 Product cost 4 Product cost 5 Selling & administrative expenses 6 Product cost 7 NA 8 NA 9 Selling & administrative expenses 10 Selling & administrative expenses $ 71,000 + + Assets Events Cash + Accounts Receivable + Inventory Stock $ 60,000 Pur Inv $ 65,000 Freight $ -900 + Sold Inv $ 71,000 Cost $-38,000 Paid Fre $ -620 Ret. Sale + $ -4.200 Ret. Inv $ 2.150 Coll AR $ 58,300 + $ -58,300 PD AP $ -59,200 PD Exp $ -2.600 PD Exp $ -3.100 + End Bal $ 51,880 + $ 8,500 $ 29,150 $ 38,000 $ 620 + + $ -4,200 $ 60,000 Financial Activity NA $ -900 $ -900 Operating Activity $ 71.000 NA $ -38,000 NA $ -620 $ -620 Operating Activity = $ -4,200 NA $ 2.150 NA $ 58,300 Operating Activity $-59,200 Operating Activity $ -2,600 $ -2,600 Operating Activity $ -3,100 $ -3,100 Operating Activity $ 23,730 $ 51,880 $ -2,150 + = $ -59,200 + = $ 2,600 $ 3,100 $ 43,070 $ 5,800 + $ 60,000 $ 66,800