During 2018, Hardy Merchandising Company purchased $40,000 of inventory on account. Hardy sold inventory on account that cost $24,500 for $38,000. Cash payments on accounts payable were $22,000. There was $26,000 cash collected from accounts receivable. Hardy also paid $5,100 cash for operating expenses. Assume that Hardy started the accounting period with $20,000 in both cash and common stock.

The Question is incomplete. Complete question is given below:

Explanation:

During 2016, Hardy Merchandising Company purchased $25,000 of inventory on account. Hardy sold inventory on account that cost $18,800 for $28,100. Cash payments on accounts payable were $15,600. There was $25,000 cash collected from accounts receivable. Hardy also paid $4,500 cash for operating expenses. Assume that Hardy started the accounting period with $20,500 in both cash and common stock.

Required

a.   Identify the events described in the preceding paragraph and record them in a horizontal statements model. The first event is recorded as an example.

b. What is the balance of accounts receivable at the end of 2016?

c. What is the balance of accounts payable at the end of 2016?

d. What are the amounts of gross margin and net income for the 2016?

e. Determine the amount of net cash flow from operating activities?

Answers are given below:

Answer a:

Due to Copy paste problem, i cannot post the table in the answer. Please see the attachment.

Answer b:

According to given data, the company make purchases of $25000 on credit and paid $ 15,600 cash to account payable. Hence, the account payable net balance is ($25,600-15,600= $9,400).

Answer c:

The company sold inventory on account for $ 28,100 and collected $25,000 from accounts receivable. Hence the net balance for account receivable is $3,100 i.e. ($ 28,100-$25,000).

Answer d:

Sold Inventory = $ 28,100

Sold Inventory Cost= ($18,800)

Gross Profit =  $ 9,300

Expenses = ($ 4,500)

Net Income = $ 4,800

Answer e:

Cash flow from Operating activities:

Cash From Accounts Receivable= $ 25,000

Account Payable paid  = ($ 15,600)

Expenses = ($ 4,500)

Net Cash flow from Operating activities= $ 4,900.

All the answers calculations are also given in the attachment.

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