Spear Company experienced the following accounting events during its first year of operation. With the exception of

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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.

Spear Company experienced the following accounting events during its first

*Record accumulated depreciation as negative amounts in thesecolumns.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Fundamental Managerial Accounting Concepts

ISBN: 978-0078025655

7th edition

Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old

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