Exercise 7-21 Current liabilities LO 7-1, 7-2, 7-4, 7-10 [The following informat

Question

Exercise 7-21 Current liabilities LO 7-1, 7-2, 7-4, 7-10 [The following information applies to the questions displayed below.] The following transactions apply to Ozark Sales for 2018: The business was started when the company received $48,500 from the issue of common stock. Purchased equipment inventory of $177,500 on account. Sold equipment for $193,500 cash (not including sales tax). Sales tax of 6 percent is collected when the merchandise is sold. The merchandise had a cost of $118,500. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 3 percent of sales. Paid the sales tax to the state agency on $143,500 of the sales. On September 1, 2018, borrowed $19,500 from the local bank. The note had a 6 percent interest rate and matured on March 1, 2019. Paid $5,900 for warranty repairs during the year. Paid operating expenses of $52,500 for the year. Paid $124,500 of accounts payable. Recorded accrued interest on the note issued in transaction no. 6. Exercise 7-21 Part b Prepare the income statement, balance sheet, and statement of cash flows for 2018. This is the last question in the assignment. To submit, use Alt + S. To access other questions, proceed to the question map button.

Explanation / Answer

JOURNAL ENTRY ACCOUNT DEBIT CREDIT Cash $48,500 Common Stock $48,500 Equipment Inventory $177,500 Accounts payable $177,500 Cash $205,110 Sales Revenue $193,500 Sales tax liability $11,610 (193500*0.06) Cost of goods sold $118,500 Equipment inventory $118,500 Warranty expenses $5,805 (0.03*193500) Warrananty Liability $5,805 Sales tax liability $        8,610 (143500*0.06) Cash $        8,610 Cash $19,500 Note payable $19,500 Warranty Liability $5,900 Cash $5,900 Operating expenses $52,500 Cash $52,500 Accounts payable $124,500 Cash $124,500 Interest expenses $390 (19500*0.06)*(4/12) Interest payable $390 CASH ACCOUNT Description Debit Credit Common stock issued $48,500 Cash received against sales $205,110 Sales tax paid $8,610 Notes payable $19,500 Warranty Liability $5,900 Operating expenses $52,500 Accounts payable $124,500 Ending Balance $81,600 EQUIPMENT INVENTORYACCOUNT Description Debit Credit Purchase of Equipment on a/c $177,500 Cost of goods sold $118,500 Ending Balance $59,000 ACCOUNTS PAYABLE ACCOUNT Description Debit Credit Equipment Inventory $177,500 Cash $124,500 Ending Balance $53,000 SALES TAX LIABILITY ACCOUNT Description Debit Credit Cash sales $11,610 Cash $        8,610 Ending Balance $3,000 WARRANTY LIABILITY ACCOUNT Description Debit Credit Warranty expenses $5,805 Cash $5,900 Warranty expenses $95 INTEREST PAYABLE ACCOUNT Description Debit Credit Interest expenses $390 NOTES PAYABLE ACCOUNT Description Debit Credit Cash $19,500 COMMON STOCK ACCOUNT Description Debit Credit Cash $48,500 SALES REVENUE ACCOUNT Description Debit Credit Cash sales $193,500 COST OF GOODS SOLD ACCOUNT Description Debit Credit Equipment inventory $118,500 WARRANTY EXPENSE ACCOUNT Description Debit Credit Warranty Liability $5,805 Warranty Liability $95 OPERATING EXPENSES ACCOUNT Description Debit Credit Cash $52,500 INTEREST EXPENSES ACCOUNT Description Debit Credit Interest payable $390 TRIAL BALANCE ACCOUNT DEBIT CREDIT Cash $81,600 Equipment Inventory $59,000 Accounts Payable $53,000 Warranty Liability $0 Sales Tax Liability $3,000 Interest payable $390 Notes payable $19,500 Common Stock $48,500 Sales Revenue $193,500 Cost of goods sold $118,500 Operating expenses $52,500 Warranty expenses $5,900 Interest expenses $390 Total $317,890 $317,890 INCOME STATEMENT Sales Revenue $193,500 Cost of goods sold $118,500 Gross Profit $75,000 Operating expenses $52,500 Warranty expenses $5,900 Interest expenses $390 Operating Income $16,210 BALANCE SHEET ASSETS; Cash $81,600 Equipment Inventory $59,000 Total Assets $140,600 LIABILITIES: Accounts Payable $53,000 Sales Tax Liability $3,000 Interest payable $390 Notes payable $19,500 Total Liabilities $75,890 OWNERS EQUITY Common Stock $48,500 Retained Earnings $16,210 Total Owners equity $64,710 Total Liabilities and owners equity $140,600 STATEMENT OF CASH FLOW Net Income $16,210 Increase in inventory ($59,000) Increase in accounts payable $53,000 Sales Tax Liability $3,000 Interest payable $390 Notes payable $19,500 Common stock $48,500 Total cash Flow $81,600

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.