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3 December, 04:39

Exercise 4-2A Effect of inventory transactions on journals, ledgers, and financial statements: Perpetual system LO 4-1 Dan Watson started a small merchandising business in Year 1. The business experienced the following events during its first year of operation. Assume that Watson uses the perpetual inventory system. Acquired $27,500 cash from the issue of common stock. Purchased inventory for $22,000 cash. Sold inventory costing $15,600 for $30,500 cash. Required. Record the events in general journal format. b. Post the entries to T-accounts. c. Determine the amount of gross margin. d. What is the amount of net cash flow from operating activities for Year 1

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  1. 3 December, 04:55
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    a. General Journal

    1

    Dr Cash $27,500

    Cr Common Stock $27,500

    2

    Dr Merchandise Inventory $22,000

    Cr Cash $22,000

    3

    Dr Cash $ 30,500

    Sales $ 30,500

    4

    Dr Cost of goods sold $ 15,600

    Merchandise Inventory $ 15,600

    c)

    Income Statement

    For the year ended December 31, Year 1

    Sales $ 30,500

    Cost of good sold $ 15,600

    Gross Margin $ 14,900

    d)

    Cash Flow from Operating Activities:

    Purchase of Inventory ($22,000)

    Cash Sales made $ 30,500

    Cash Flow from Operating Activities $8,500
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