Transaction analysis and preparation of financial statements Flashy Fashions Ltd is a small company in a coastal town. It rents its premises and its sales are all on credit. It has only three...

Transaction analysis and preparation of financial statements Flashy Fashions Ltd is a small company in a coastal town. It rents its premises and its sales are all on credit. It has only three expenses: cost of goods sold, rent and income tax. At the end of its previous financial year, 30 September 2018, Flashy’s balance sheet was as follows: FLASHY FASHIONS LTD BALANCE SHEET AS AT 30 SEPTEMBER 2018 Assets $ Liabilities and shareholders’ equity $ Current assets Current liabilities Cash 800 Accounts payable 600 Accounts receivable 400 Rent payable 700 Inventory 900 Shareholders’ equity Share capital 300 Retained profits 500 Total assets 2 100 Total liabilities and shareholders’ equity 2 100 During the year ended 30 September 2019, the following information was recorded in the company’s accounts. a Revenue from credit sales $10 000. b Collections from customers $9600. c Purchases on credit of inventory for sale $6100. d Payments to suppliers $6300. e Cost of goods sold $6400. f Rent charged by the landlord $2400. g Rent paid to the landlord $2900 (decreasing the liability). h Income tax payable for the year $350. i Cash dividends declared and paid to shareholders $450. Required: 1 Prepare transaction analysis for each of the above items. 2 Prepare an income statement and a balance sheet.