Question: Diamond Supply Company had the following transactions in 2016 1 Acquired

Diamond Supply Company had the following transactions in 2016:
1. Acquired $50,000 cash from the issue of common stock.
2. Purchased $120,000 of merchandise for cash in 2016.
3. Sold merchandise that cost $95,000 for $180,000 during the year under the following terms:
$ 50,000 Cash sales
115,000 Credit card sales (The credit card company charges a 3 percent service fee.)
15,000 Sales on account
4. Collected all the amount receivable from the credit card company.
5. Collected $11,300 of accounts receivable.
6. Paid selling and administrative expenses of $51,500.
7. Determined that 5 percent of the ending accounts receivable balance would be uncollectible.
a. Show the effects of each of the transactions on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, - for decrease, and NA for not affected. The first transaction is entered as an example.
b. Prepare general journal entries for each of the transactions and post them to T-accounts.
c. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2016.

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  • CreatedApril 20, 2015
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