Question

Sinclair Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared in accordance with GAAP

1. Acquired $68,000 cash by issuing common stock
2. Paid $8,700 for the materials used to make its products, all of which were started and completed during the year.
3. Paid salaries of $4,500 to selling and administrative employees
4. Paid wages of $10,000 to production workers
5. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life 6. Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a five-year useful life 7. Sold inventory to customers for $35,000 that had cost $14,000 to make Required Indicate how these events would affect the balance sheet and income statement by recording them in a horizontal financial statements model as indicated here. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA), or NA for not affected.

Answer 1

Answer:

Please see the attached image for the Horizontal Financial Statements of Sinclair Manufacturing Company.

Explanation:

5. FURNITURE - Straight Line Method

Book Value of Furniture = Cost of Acquisition - Residual Value

Cost of Acquisition = $9,600

Residual Value = $1,600

Book Value of Furniture = $9,600 - $1,600

Book Value of Furniture = $8,000

Useful Life = 4 years

Depreciation Expense = $8,000 / 4 years

Depreciation Expense = $2,000 per year

6. EQUIPMENT - Straight Line Method

Book Value of Equipment = Cost of Acquisition - Residual Value

Cost of Acquisition = $16,000

Residual Value = $1,000

Book Value of Furniture = $16,000 - $1,000

Book Value of Furniture = $15,000

Useful Life = 5 years

Depreciation Expense = $15,000 / 5 years

Depreciation Expense = $3,000 per year