Northwest Sales had the following transactions in 2018:
1. Acquired $200,000 cash from the issue of common stock.
2. Purchased $900,000 of merchandise for cash in 2018.
3. Sold merchandise that cost $710,000 for $1,200,000 during the year under the following terms:
$520,000……………Cash sales
380,000……………..Credit card sales (The credit card company charges a 4 percent service fee.)
300,000……………..Sales on account
4. Collected all the amount receivable from the credit card company.
5. Collected $210,000 of accounts receivable.
6. Paid selling and administrative expenses of $190,000.
7. Determined that 5 percent of the ending balance would be uncollectible.
Required
a. Record these events in a horizontal statements model like the following one. When you record amounts in the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). The letters NA indicate that an element is not affected by the event.
b. Prepare an income statement, a statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows for 2018.
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