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determining the effect of inventory transactions on the horizontal statements model 650195

Determining the effect of inventory transactions on the horizontal statements model: perpetual system

Ramsey Company experienced the following events.

1. Purchased merchandise inventory on account.

2. Purchased merchandise inventory for cash.

3. Sold merchandise inventory on account. Label the revenue recognition 3a and the expense recognition 3b.

4. Returned merchandise purchased on account.

5. Sold merchandise inventory for cash. Label the revenue recognition 5a and the expense recognition 5b.

6. Paid cash on accounts payable within the discount period.

7. Paid cash for selling and administrative expenses.

8. Collected cash from accounts receivable not within the discount period.

9. Paid cash for transportation out.

10. Paid cash for transportation in.

Required

Identify each event as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event affects the financial statements by placing a 1 for increase, 2 for decrease, or NA for not affected under each of the components in the following statements model. Assume the company uses the perpetual inventory system. The first event is recorded as an example.

Event
No.

Event
Type

Assets

=

Liab.

+

Equity

Rev.

Exp.

=

Net Inc.

Cash Flow

1

AS

+

=

+

+

NA

NA

NA

=

NA

NA

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