Merrick Company began operations in 2014 by issuing common stock for $400 cash. During the year, Merrick Company purchased $800 of merchandise on account. It sold for $920 cash inventory that had cost $650. It paid off $500 on its account payable and also paid $180 cash for operating expenses.
Required:
a) Record the events in the statements model, below. Show amounts of increases and decreases. Indicate whether each cash flow is an operating activity, investing activity, or financing activity.
b) Prepare the 2014 income statement for Merrick using a multistep format.

Question

Merrick Company began operations in 2014 by issuing common stock for $400 cash. During the year, Merrick Company purchased $800 of merchandise on account. It sold for $920 cash inventory that had cost $650. It paid off $500 on its account payable and also paid $180 cash for operating expenses.
Required:
a) Record the events in the statements model, below. Show amounts of increases and decreases. Indicate whether each cash flow is an operating activity, investing activity, or financing activity.  
b) Prepare the 2014 income statement for Merrick using a multistep format.

Quizplus · Accepted Answer

The Answer of Merrick Company began operations in 2014 by issuing common stock for $400 cash. During the year, Merrick Company purchased $800 of merchandise on account. It sold for $920 cash inventory that had cost $650. It paid off $500 on its account payable and also paid $180 cash for operating expenses.
Required:
a) Record the events in the statements model, below. Show amounts of increases and decreases. Indicate whether each cash flow is an operating activity, investing activity, or financing activity.  
b) Prepare the 2014 income statement for Merrick using a multistep format.

Merrick Company Began Operations in 2014 by Issuing Common Stock