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Exercise 9-8A (Algo) Current liabilities LO 9-1, 9-2, 9-4

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The following transactions apply to Ozark Sales for Year 1:

1. The business was started when the company received $48,500 from the issue of common stock.
2. Purchased equipment inventory of $175,500 on account.
3. Sold equipment for $195,500 cash (not including sales tax). Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $120,500.
4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 4 percent of sales.
5. Paid the sales tax to the state agency on $145,500 of the sales.
6. On September 1, Year 1, borrowed $21,000 from the local bank. The note had a 6 percent interest rate and matured on March 1, Year 2.
7. Paid $5,600 for warranty repairs during the year.
8. Paid operating expenses of $53,500 for the year.
9. Paid $126,000 of accounts payable.
10. Recorded accrued interest on the note issued in transaction no. 6.

Answer is not complete. \begin{tabular}{|c|c|c|} \hline \multicolumn{3}{|l|}{ OZARK SALES } \\ \hline \multicolumn{3}{|l|}{ Balance Sheet } \\ \hline \multicolumn{3}{|l|}{ As of December 31, Year 1} \\ \hline \multicolumn{3}{|l|}{ Assets } \\ \hline 0 & & \\ \hline Merchandise inventory & & 55,000 \\ \hline Total assets & & $55,000 \\ \hline \multicolumn{3}{|l|}{ Liablities } \\ \hline Accounts payable & & $49,5000 \\ \hline Sales tax payable & & 3,5000 \\ \hline Warranty payable & & 2,2200 \\ \hline Interest payable & & 4200 \\ \hline Notes payable & & 21,000 \\ \hline Total liabilities & & 76,640 \\ \hline \multicolumn{3}{|l|}{ Stockholders' equity } \\ \hline Common stock & $48,5000 & \\ \hline Retained earnings & 13,260 & \\ \hline Total stockholders' equity & & 81,760 \\ \hline Total liabilities and stockholders' equity & & $138,400 \\ \hline \end{tabular} Answer is complete but not entirely correct. \begin{tabular}{|c|c|c|} \hline \multicolumn{3}{|l|}{ OZARK SALES } \\ \hline \multicolumn{3}{|c|}{ Statement of Cash Flows } \\ \hline \multicolumn{3}{|c|}{ For the Year Ended December 31, Year 1} \\ \hline \multicolumn{3}{|l|}{ Cash flows from operating activities: } \\ \hline Inflow from customers & 195,500 & \\ \hline Inflow from sales tax & 13,685 & \\ \hline Outflow to purchase inventory & (120,500)x & \\ \hline Outflow for sales tax & (120,500)x & \\ \hline Outflow for expenses & (61,320) & \\ \hline Net cash flows from operating activities & & (93,135) \\ \hline \multicolumn{3}{|l|}{ Cash flows from investing activities: } \\ \hline \multicolumn{3}{|l|}{ Cash flows from financing activities } \\ \hline Inflow from stock issue & 48,5000 & \\ \hline Inflow from loan & 21,0000 & \\ \hline Net cash flows from financing activities & & 69,500 \\ \hline Net change in cash & & (23,635) \\ \hline Plus: Beginning cash balance & & \\ \hline Ending cash balance & & (23,635) \\ \hline \end{tabular}