Reference no: EM132492300

Question 1: What is the Outflow to purchase inventory and Outflow for sales tax?

Point 1. The business was started when the company received $48,500 from the issue of common stock.

Point 2. Purchased equipment inventory of $176,000 on account.

Point 3. Sold equipment for $192,500 cash (not including sales tax). Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $117,500.

Point 4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 3 percent of sales.

Point 5. Paid the sales tax to the state agency on $142,500 of the sales.

Point 6. On September 1, 2018, borrowed $22,000 from the local bank. The note had a 6 percent interest rate and matured on March 1, 2019.

Point 7. Paid $5,800 for warranty repairs during the year.

Point 8. Paid operating expenses of $55,000 for the year.

Point 9. Paid $124,200 of accounts payable.

Point 10. Recorded accrued interest on the note issued in transaction no. 6.

Question 2: Prepare the income statement, balance sheet, and statement of cash flows for 2018.