Question

Spear Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, all transactions were cash transactions.
1. Acquired $100,000 cash by issuing common stock.
2. Paid $19,000 for the materials used to make its products. All products started were completed during the period.
3. Paid salaries of $7,000 to selling and administrative employees.
4. Paid wages of $11,000 to production workers.
5. Paid $12,000 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,500 estimated salvage value and a seven-year useful life.
6. Paid $22,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $2,000 estimated salvage value and a five-year useful life.
7. Sold inventory to customers for $60,000 that had cost $31,000 to make.

Required
Explain how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example.


*Record accumulated depreciation as negative amounts in thesecolumns.


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  • CreatedFebruary 07, 2014
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