Required information [The following information applies to the questions display

Question

Required information

[The following information applies to the questions displayed below.]

The following transactions apply to Ozark Sales for 2018:

1. The business was started when the company received $50,000 from the issue of common stock.

2. Purchased equipment inventory of $175,000 on account.

3. Sold equipment for $202,000 cash (not including sales tax). Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $127,000.

4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 3 percent of sales.

5. Paid the sales tax to the state agency on $152,000 of the sales.

6. On September 1, 2018, borrowed $20,000 from the local bank. The note had a 7 percent interest rate and matured on March 1, 2019.

7. Paid $5,800 for warranty repairs during the year.

8. Paid operating expenses of $52,000 for the year.

9. Paid $124,500 of accounts payable.

10. Recorded accrued interest on the note issued in transaction no. 6.

Required

a. Record the given transactions in a horizontal statements model like the following one. (Enter any decreases to account balances and cash outflows with a minus sign. "In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA) and NA for not affected. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.)

CashM Merchandise Accounts Sales Tax Warranty Interest Payable Inventory Payable Payable Payable Payable+Common Stock ?? 3b 6. 10

Explanation / Answer

Asset = Liabilities + Equity Income Statement Statement of Cash Flows Cash + Merchandise Inventory = Accounts Payable + Sales Tax Payable + Warranty Payable + Interest Payable + Notes Payable + Common Stock + Retained Earnings Revenue - Expenses = Net Income 1 Issue of Common Stock              50,000 + = + + + + +          50,000 + - =                     -          50,000.00 FA 2 Purchased Inventory +              175,000 =               175,000 + + + + + + - =                     -   NA 3 Sold Inventory for Cash           216,140 +           (127,000) = +                 14,140 + + + + +                75,000          202,000 -          127,000 =           75,000     202,000.00 OA 4 Warranty Estimation + = + +                   6,060 + + + +                (6,060) -              6,060 =           (6,060) NA 5 Paid sale Tax payable           (10,640) + = +               (10,640) + + + + + - =                     -       (10,640.00) OA 6 Borrow from Local Bank              20,000 + = + + + +            20,000 + + - =                     -          20,000.00 FA 7 Paid for Warranty Repairs              (5,800) + = + +                 (5,800) + + + + - =                     -          (5,800.00) OA 8 Paid Operating Expenses           (52,000) + = + + + + + +             (52,000) -            52,000 =         (52,000)     (52,000.00) OA 9 Paid Accounts Payable         (124,500) + =            (124,500) + + + + + + - =                     -   (124,500.00) OA 10 Accrued Interest on Notes Payable + = + + +                   467 + + +                   (467) -                  467 =               (467) NA Total              93,200 +                48,000 =                 50,500 +                   3,500 +                       260 +                   467 +            20,000 +          50,000 +                16,473          202,000 -          185,527 =           16,473 Total Assets = $141,200 = Total Liabilities = $74,727 + Total equity = $66,473 Total Liabilities & Shareholders' Equity = $141,200

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