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The following transactions apply to Ozark Sales for Year 1:

1. The business was started when the company received $49,500 from the issue of common stock.
2. Purchased equipment inventory of $177,000 on account.
3. Sold equipment for $196,500 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $121,500.
4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 3 percent of sales.
5. Paid the sales tax to the state agency on $146,500 of the sales.
6. On September 1, Year 1, borrowed $20,500 from the local bank. The note had a 5 percent interest rate and matured on March 1, Year 2.
7. Paid $5,800 for warranty repairs during the year.
8. Paid operating expenses of $54,000 for the year.
9. Paid $124,200 of accounts payable.
10. Recorded accrued interest on the note issued in transaction no. 6.   
11. Required
    a. Show the effect of these transactions on the financial statements using a horizontal statements model. The first transaction is recorded as an example.

    	Event Assets = Liabilities + Equity Revenue – Expenses = Net Income Statement of Cash Flows 1. + + + FA 2. + + 3a. + + +/- + + + OA 3b. - - 4. + - 5. - - + - - OA 6. + + + FA 7. - - - OA 8. - - + - - OA 9. - - - OA 10. + -

Answer 1

	Assets                 =		Liabilities                                                                       +					Stockholers Equity
Event	cash	Merchandise	Accounts	Sales tax	Warranty	interest	notes	Common	Retaine
no		inventory	payable	payable	payable	payable	payable	Stock	earnings
1	49,500	0	0	0	0	0	0	49,500	0
2	0	177,000	177,000	0	0	0	0	0	0
3a.	212,220	0	0	15720	0	0	0	0	196,500
3b.	0	-121500	0	0	0	0	0	0	-121,500
4	0	0	0	0	5,895	0	0	0	-5,895
5	-11720	0	0	-11720	0	0	0	0	0
6	20,500	0	0	0	0	0	20,500	0	0
7	-5,800	0	0	0	-5,800	0	0	0	0
8	-54,000	0	0	0	0	0	0	0	-54,000
9	-124,200	0	-124200	0	0	0	0	0
10	0	0	0	0	0	342	0	0	-342
Bal	86,500	55500	52800	4000	95	341.7	20500	49,500	14763
		Revenues	expenses	net	Statement of cash flow
				income
		0	0	0	49,500	FA
		0	0	0	0	NA
		196,500	0	196500	212,220	OA
		0	121,500	-121500	0	NA
		0	5,895	-5895	0	NA
		0	0	0	-11,720	OA
		0	0	0	20,500	FA
		0	0	0	-5,800	OA
		0	54,000	-54,000	-54,000	OA
		0	0	0	-124,200	OA
		0	0	-342	0	OA
		196500	181395	14763	86,500