mpany experienced the following accounting events during its first year of Gunn

Question

mpany experienced the following accounting events during its first year of Gunn Manufacturing Co operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions 1. Acquired $53,000 cash by issuing common stock. 2. Paid $7,100 for the materials used to make its products, all of which were started and completed during the year 3. Paid salaries of $4,400 to selling and administrative employees 4. Paid wages of $6,700 to production workers. 5. Paid $4,700 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,700 estimated salvage value and a three-year useful life 6. Paid $11,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,700 estimated salvage value and a three-year useful life 7. Sold inventory to customers for $25,800 that had cost $13,700 to make Required Show how these events would affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model as indicated here. Also, in the Cash Flow column indicate whether the cash flow is for operating activities (OA), investing activities (IA), or financing activities (FA). Use NA to indicate that an element is not affected by the event. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.)

Explanation / Answer

Shown as below:

GUNN MANUFACTURING COMPANY Financial Statement Model Event No. Assets Equity Income Statement Statement of Cash Flow Cash + Inventory + Manufacturing Equipment + Office Furniture = Common Stock + Retained earnings Revenue - Expense = Net Income 1 53,000 53,000 53,000 FA 2 -7,100 7,100 7,100 Decrease OA 3 -4,400 -4,400 4,400 -4,400 4,400 decrease OA 4 -6,700 -6,700 6,700 -6,700 6,700 decrease OA 5a -4,700 4,700 4,700 decrease IA 5b -1,000 -1,000 1,000 -1,000 NA 6a -11,000 11,000 11,000 decrease in IA 6b -3,100 -3,100 3,100 -3,100 NA 7a 25,800 25,800 25,800 25,800 25,800 increase OA 7b -13,700 -13,700 NA Total 44,900 -6,600 11,000 600 39,300 10,600 25,800 15,200 10,600 44,900

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