Question

During 2014, King Merchandising Company purchased $30,000 of inventory on account. King sold inventory on account that cost $22,500 for $31,000. Cash payments on accounts payable were $18,000. There was $22,000 cash collected from accounts receivable. King also paid $4,200 cash for operating expenses. Assume that King started the accounting period with $18,000 in both cash and common stock.

Required
a. Identify the events described in the preceding paragraph and record them in a horizontal statements model like the following one:


b. What is the balance of accounts receivable at the end of 2014?
c. What is the balance of accounts payable at the end of 2014?
d. What are the amounts of gross margin and net income for 2014?
e. Determine the amount of net cash flow from operating activities.
f. Explain why net income and retained earnings are the same for King. Normally would these amounts be the same? Why or whynot?


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  • CreatedMay 22, 2014
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