During 2016, Hardy Merchandising Company purchased $25,000 of inventory on account. Hardy sold inventory on account that cost $18,800 for $28,100.

During 2016, Hardy Merchandising Company purchased $25,000 of inventory on account. Hardy sold inventory on account that cost $18,800 for $28,100. Cash payments on accounts payable were $15,600. There was $25,000 cash collected from accounts receivable. Hardy also paid $4,500 cash for operating expenses. Assume that Hardy started the accounting period with $20,500 in both cash and common stock.


Required
a.   Identify the events described in the preceding paragraph and record them in a horizontal statements model. The first event is recorded as an example.






b. What is the balance of accounts receivable at the end of 2016?

 

Explanation:

d.

Sales	$	28,100
Cost of goods sold		(18,800	)
Gross margin		9,300
Operating expenses		(4,500	)
Net income	$	4,800

 
e.

Cash flows from operating activities:
Cash inflow from customers	$	25,000
Cash outflow for inventory		(15,600	)
Cash outflow for expenses		(4,500	)
Net cash flow from operating activities	$	4,900

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