Question

Jordan 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 $54,000 cash by issuing common stock 2. Paid $7,500 for the materials used to make its products, all of which were started and completed during the year. 3. Paid salaries of $3,600 to selling and administrative employees. 4. Paid wages of $6.900 to production workers. 5. Paid $5,400 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,500 estimated salvage value and a three-year useful life. 6. Paid $11,300 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,100 estimated salvage value and a three-year useful life. 7. Sold inventory to customers for $25,000 that had cost $13,100 to make. Required Indicate 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 any decreases to account balances with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), Investing activity (IA), financing activity (FA), or leave the cell blank if there is no effect.)

Answer 1

5b depreciation calculation = ($5,400 - $1,500)/3 = 6b depreciation calculation = ($11,300 - $1,100)/3 = $ 1,300 $ 3,400 assets income statement event office financial statements model equity common ret. Ear. stock $ 54,000 cash manuf. Equip + inventory + rev. exp. = net inc. cash flow no. furn. $ 7,500 + 1 2 3 4 5a $ 54,000 $ (7,500)| + $ (3,600) + $ (6,900)| + $ (5,400) + + $ (3,600) $ 3,600 = $ 6,900 + $ 5,400 $(1,300) = $ (1,300) $ 1,300 = $ 54,000 FA $ (7,500) OA $ (3,600) $ (3,600)| OA $ (6,900)| OA $ (5,400) IA $ (1,300) $(11,300) IA $ (3,400) $ 25,000 $ 25,000 OA $(13,100) $ 3,600 $ 44,300 6a $(11,300)| + + $11,300 + $ (3,400) + 6b + $ 3,400 7a $ 25,000 $25,000 $ (3,400)| $ 25,000 $(13,100) $ 3,500 = = = = 7b + + $(13,100) $ 1,300 $ 13,100 $ 21,400 total + + $ 44,300 $ 7,900 + $ 4,100 = $ 54,000 + $25,000 -

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