Recording product versus SGA costs in a Jinancial statements

Recording product versus SG&A; costs in a Jinancial statements model Exercise 1-7B Mueller Electronics Con Received $87,000 cash by issuing common stock 2. I. Paid $30,000 cash for wages to production workers 3. Paid $15,000 for salaries to administrative staf. 4. 5. Purchased for cash and used $16,000 of raw materials. Recognized $1,000 of depreciation on administrative offices. 6. Recognized $1,500 of depreciation on manufacturing equipment. 7. Recognized $48,000 of sales revenue from cash sales of products. 8. Recognized $30,000 of cost of goods sold from the sale referenced in Event 7 Required Use a horizontal financial statements model to show how each event affects the balance shee come statement. Assume the financial statements are prepared in accordance with GAAP whether the event increases (), decreases (D), or does not affect (NA) each element of h statements. The first transaction is shown as an example. (Note: Show accumulated de decrease in the book value of the appropriate asset account.) preciatio Assets Equity Event Manuf. Adm. Com. Ret. Cash + Inventory + Equip. + Offices- Stk. + Ear. No. Rev.-Exp. letin NA NA NA NA NA NA

Solution

Assets Equity Event No. Cash + Inventory + Manuf. Equip. + Adm. Offices = Common Stock + Retained Earnings Revenue - Expenses = Net Income 1 I NA NA NA I NA NA NA NA 2 D I NA NA NA NA NA NA NA 3 D NA NA NA NA D NA I D 4 D I NA NA NA NA NA NA NA 5 NA NA NA D NA D NA I D 6 NA I D NA NA NA NA NA NA 7 I NA NA NA NA I I NA I 8 NA D NA NA NA D NA I D This transaction will Increase the cash and Increase the common Stock. This transaction will decrease the cash and Increase the Inventory. This transaction will decrease the cash and as an expense this will increase the Expenses and this will lead to decrease the Net Income and Retained Earnings. This transaction will decrease the cash and increase the Inventory. This transaction will decrease the Admin. Office balance and as an expense this will Increase Expense and Reduce the Net Income and Retained Earnings. This will decrease the Manufacturing Equipment and increase the Inventory. This will increase the Cash and as an Income this will increase the Revenue and Increase in Net income and Retained Earnings. This will decrease the Inventory and as an expense this will increase the Expenses and this leads to Decrease in Net Income and Retained Earnings.