Milo Clothing experienced the following events during 2018, its first year of op
ID: 2338167 • Letter: M
Question
Milo Clothing experienced the following events during 2018, its first year of operation:
Acquired $16,000 cash from the issue of common stock.
Purchased inventory for $7,000 cash.
Sold inventory costing $4,200 for $7,140 cash.
Paid $950 for advertising expense.
Required
Record the events in a horizontal statement model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash and NA to indicate the element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.)
Explanation / Answer
Events Asset = Stockholder's equity Revenue - Expense = Net income Cash flow Cash + Inventory = common stock + retained earnings 1 16000 + 0 = 16000 + 0 Financing activity 2 -7000 + 7000 = 0 + 0 Operting activity 3 7140 + -4200 = 0 + 2940 7140 - 4200 = 2940 Operating activity 4 -950 + 0 = 0 + -950 0 - 950 = -950 Operating activity TOTAL 15190 + 2800 = 16000 + 1990 7140 - 5150 = 1990