The following events apply to Gulf Seafood for the 2018 fiscal year: The company

Question

The following events apply to Gulf Seafood for the 2018 fiscal year:

The company started when it acquired $18,000 cash by issuing common stock.

Purchased a new cooktop that cost $16,400 cash.

Earned $20,700 in cash revenue.

Paid $10,300 cash for salaries expense.

Adjusted the records to reflect the use of the cooktop. Purchased on January 1, 2018, the cooktop has an expected useful life of four years and an estimated salvage value of $2,100. Use straight-line depreciation. The adjusting entry was made as of December 31, 2018.

Record the above transactions in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA) and net change in cash (NC). The letters NA indicate that an element is not affected by the event. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA) and net change in cash (NC). The letters NA indicate that an element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus sign.)

GULF SEAFOOD Horizontal Statements Model Event Balance Sheet Income Statement Statement of Cash Flows Assets = Equity Revenue – Expense = Net Income Cash + Equipment – Accumulated Depreciation = Common Stock + Retained Earnings 1. + – = + – = 2. + – = + – = 3. + – = + – = 4. + – = + – = 5. + – = + – = Bal. + – = + – =

Explanation / Answer

GULF SEAFOOD

Horizontal statements model

Event Balance sheet Income statement Statement of cash flows Assts = Equity Revenue - Expense = Net income Cash + equipment - Accumlated depreciation = Common Stock + Retained earnings 1. 18000 + 0 - 0 = 18000 + 0 0 - 0 = 0 18000 FA 2. -16400 + 16400 - 0 = 0 + 0 0 - 0 = 0 -16400 IA 3. 20700 + 0 - 0 = 0 + 20700 20700 - 0 = 20700 20700 OA 4. -10300 + 0 - 0 = 0 + -10300 0 - 10300 = -10300 -10300 OA 5 0 + 0 - 3575 = 0 + -3575 0 - 3575 = -3575 NA Bal 12000 + 16400 - 3575 = 18000 + 6825 20700 - 6725 = 13975 12000

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