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. 10. 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 Cost Transaction 1 2. 3 4 5 6 7. 8 9 10

Answer 1

The pet store Events Assets A/R + Inventory = Liabilities + A/P+ Balance Sheet Stockholders' equity Income Statement Common Stock + R/E Revenue - Expense = Net income 60000 + Cash + 60000 + 1 65000 + 65000 + -900 -900 71000 + 71000 + -38000 -38000 -620 Events 1 2 3 4a) 4b) 5 ба) 6 b) 7 8 9 10 Total -900 71000 + -38000 -620 -4200 2150 + -620 -4200 Stmt. Of Cash Flows FA 60000 ОА 65000 OA 900 OA 71000 OA 38000 ОА 620 OA 4200 OA 2150 OA 58300 59200 OA 2600 ОА 3100 -4200 2150 + 2150 + -59200 ОА 58300 + -58300 -59200 -2600 -3100 118680 -58300 -2600 -3100 -2600 -3100 23730 29150 5800 60000 23730 Part a 1. NA 2. product costs 3. product costs 4. NA 5. NA 6. NA 7. NA 8. NA 9. period costs 10. period cosst