Reference no: EM13929243
New England Sales had the following transactions in 2013:
1. The business was started when it acquired $300,000 cash from the issue of common stock.
2. New England purchased $900,000 of merchandise for cash in 2013.
3. During the year, the company sold merchandise for $1,500,000. The merchandise cost $820,000. Sales were made under the following terms:
a. $530,000...Cash sales
b. 450,000..Credit card sales (The credit card company charges a 4 percent service fee.)
c. 520,000...Sales on account
4. The company collected all the amount receivable from the credit card company.
5. The company collected $480,000 of accounts receivable.
6. The company paid $215,000 cash for selling and administrative expenses.
7. Determined that 5 percent of the ending accounts receivable balance would be uncollectible.
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Required:
a. Show the effects of each of the transactions on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, Use - for decrease, and NA for not affected. The first transaction is entered as an example.
b. Prepare general journal entries for each of the transactions, and post them to T-accounts.
c. Prepare an income statement, statement of changes in stockholders equity, balance sheet, and statement of cash flows for 2013.