Diamond Supply Company had the following transactions in Year 1:
1. Acquired $50,000 cash from the issue of common stock.
2. Purchased $120,000 of merchandise for cash in Year 1.
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 (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.

Required
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 next. Use + for increase, − for decrease, and NA for not affected. The first transaction is entered as an example.

b. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1.

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Balance Sheet Income Statement Statement Event No. of Cash Llab. + Equlty Net Inc. Exp. Flows Assets Rev. NA 1. NA + FA NA NA