[The following information applies to the questions displayed below.] The following transactions apply to Ozark Sales for 2018: The business was started when the company received $50,000 from the issue of common stock. Purchased equipment inventory of $380,000 on account. Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $330,000. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 2 percent of sales. Paid the sales tax to the state agency on $400,000 of the sales. On September 1, 2018, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, 2019. Paid $6,200 for warranty repairs during the year. Paid operating expenses of $78,000 for the year. Paid $250,000 of accounts payable. Recorded accrued interest on the note issued in transaction no. 6. Required Record the given transactions in a horizontal statements model like the following one. (Enter any decreases to account balances and cash outflows with a minus sign. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA), and leave the cell blank if there is no effect. Do not round intermediate calculations and round your answers to the nearest whole dollar amounts.)

Solution and Explanation:

                                            OZARK SALES

                                           Income Statement

                            For the Year Ended December 31, 2018

Sales revenue  510000

Cost of goods sold  330000

Gross margin  180000

Expenses    

Operating expenses  78000  

Warranty expenses  10200      

Total operating expenses  88200

Operating income  91800

Interest expense  667    

Net income  91133

                                             OZARK SALES

                                                   Balance Sheet

                                              As of December 31, 2018

Assets  

Cash                                    284600

Merchandise inventory  50000

Total assets                                                         334600

Liabilities  

Accounts payable                      130000  

Sales tax payable                        8800  

Notes payable                      50000  

Warranties payable                4000  

Interest payable                          667      

Total liabilities                  193467

Stockholders' equity    

Common stock                           50000  

Retained earnings                       91133  

Total stockholders' equity          141133

Total liabilities and stockholders' equity                          334600

                                       OZARK SALES

                                   Statement of Cash Flows

                     For the Year Ended December 31, 2018

Cash flows from operating activities:  

Inflow from customers  510000  

Inflow from sales tax  40800  

Outflow for expenses  -84200  

Outflow for sales tax  -32000  

Outflow to purchase inventory  -250000      

Net cash flow from operating activities  184600

Cash flows from investing activities    

Cash flows from financing activities:    

Inflow from loan               50000  

Inflow from stock issue  50000      

Net cash flows from financing activities  100000

Net change in cash  284600

Plus: Beginning cash balance  0

Ending cash balance  284600

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