(1) During Year 1, Hardy Merchandising Company purchased $28,000 of inventory on account. (2) Hardy sold inventory on account that cost $21,000 for $31,500. (3) Cash payments on accounts payable were $17,500. (4) There was $28,000 cash collected from accounts receivable. (5) Hardy also paid $4,800 cash for operating expenses. Assume that Hardy started the accounting period with $22,000 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. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), Investing activities (IA), or financing activities (FA). b. What is the balance of accounts receivable at the end of Year 1? c. What is the balance of accounts payable at the end of Year 1? d. What are the amounts of gross margin and net income for Year 1? e. Determine the amount of net cash flow from operating activities.

(1) During Year 1, Hardy Merchandising Company purchased $28,000 of inventory on account. (2) Hardy sold inventory on account that cost $21,000 for $31,500. (3) Cash payments on accounts payable were $17,500. (4) There was $28,000 cash collected from accounts receivable. (5) Hardy also paid $4,800 cash for operating expenses. Assume that Hardy started the accounting period with $22,000 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. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), Investing activities (IA), or financing activities (FA). b. What is the balance of accounts receivable at the end of Year 1? c. What is the balance of accounts payable at the end of Year 1? d. What are the amounts of gross margin and net income for Year 1? e. Determine the amount of net cash flow from operating activities.

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Description: None (1) During Year 1, Hardy Merchandising Company purchased $28,000 of inventory on account. (2) Hardy sold inventory on account thatcost $21,000 for $31,500. (3) Cash payments on accounts payable were $17,500. (4) There was $28,000 cash collected

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 43P

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