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DAN WATSON MERCHANDISING Effect of Events on Financial Statements 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. 1. Acquired $27,000 cash from the issue of common stock. 2. Purchased inventory for $21,600 cash. 3. Sold inventory costing $16,800 for $31,500 cash. Required: a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (A), or financing activities (FA). b. Prepare an income statement for Year 1 (use the multistep format). c. What is the amount of total assets at the end of the period? Complete this question by entering your answers in the tabs below. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More speofically record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash fiows as operating activities (OA), investing activities (IA), or financing activities (FA). Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed. c. What is the amount of total assets at the end of the period? Complete this question by entering your answers in the What is the amount of total assets at the end of the period? the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. Prepare an income statement for Year 1 (use the multistep format). c. What is the amount of total assets at the end of the period? Complete this question by entering your answers in the tabs below. Prepare an income statement for Year 1 (use the multistep format)

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