During 2007, Etc. Merchandising Company purchased \($40,000\) of inventory on account. The company sold inventory on account that cost \($30,000\) for \($45,000\). Cash payments on accounts payable were \($25,000\). There was \($40,000\) cash collected from accounts receivable. Etc. also paid \($8,000\) cash for operating expenses. Assume that Etc. started the accounting period with \($36,000\) 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 2007?

c. What is the balance of accounts payable at the end of 2007?

d. What are the amounts of gross margin and net income for 2007?

e. Determine the amount of net cash flow from operating activities.

f. Explain any differences between net income and net cash flow from operating activities.

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Assets Liab. Equity Rev. - Exp. = Net Inc. Cash Flow Cash + Accts. Rec. + Inv. == Accts. Pay. + Com. Stk. + Ret. Earn. 36,000+ NA S + NA === NA + 36,000 + NA NA - NA = NA NA NA