Tavia Manufacturing Company’s first year of operation is summarized in the following list. All transactions are cash transactions unless otherwise indicated.

1. Acquired cash by issuing common stock.

2. Purchased administrative equipment.

3. Purchased manufacturing equipment.

4. Purchased direct raw materials.

5. Purchased indirect materials (production supplies).

6. Used direct raw materials in making products.

7. Paid direct labor wages to manufacturing workers.

8. Applied overhead costs to Work in Process Inventory.

9. Paid indirect labor salaries (production supervisors).

10. Paid administrative and sales staff salaries.

11. Paid rent and utilities on the manufacturing facilities.

12. Completed work on products.

13. Sold completed inventory for cash (revenue event only).

14. Recognized cost of goods sold.

15. Recognized depreciation on manufacturing equipment.

16. Recognized depreciation on administrative equipment.

17. Recognized the amount of production supplies that had been used during the year.

18. Closed the Manufacturing Overhead account. Overhead had been underapplied during the year.

Required

1. Use the horizontal statements model to show how each event affects the balance sheet and the income statement.

2. Identify the accounts affected by each event and indicate whether they increased or decreased as a result of the event.