Question

Yard Professionals Inc. experienced the following events in Year 1, its first year of operation:

1. Performed services for $21,500 cash.
2. Purchased $4,200 of supplies on account.
3. A physical count on December 31, Year 1, found that there was $1,010 of supplies on hand.

Required
Based on this information alone

a. Record the events in general ledger accounts under an accounting equation. (Enter any decreases to account balances with a minus sign.)

+ YARD PROFESSIONALS INC. Effect of Events on the Accounting Equation for Year 1 Assets Liabilities Event Cash Supplies Accounts Payable 1. Provided service 2. Purchased supplies 3. Used supplies Totals Stockholders Equity Retained Earnings - + + +

b. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period.

Answer 1

Solution a:

YARD PROFESSIONALS INC.
Effect of Events on the Accounting Equation
Event		Assets		=	Liabilities	+	Stockholders’ Equity
		Cash	Supplies	=	Accounts Payable	+	Retained Earnings
1	Performed Counselling services	21500		=		+	21500
2	Purchase Supplies		4200	=	4200	+
3	Used Supplies (4200-1010)		-3190	=		+	-3190
Totals		21500	1010	=	4200	+	18310

Solution b:

YARD PROFESSIONALS INC.
Income Statement
For the year ended Dec 31, 2018
Service Revenue	21500
Less: Supplies expense	3,190
Net Income	18,310
YARD PROFESSIONALS INC.
Balance sheet
As of Dec 31, 2018
ASSETS:
Cash	21,500
Supplies	1,010
Total Assets		22,510
LIABILITIES:
Accounts Payable	4,200
Total Liabilities		4,200
Stockholders' Equity:
Retained Earnings	18,310
Total Stockholders' Equity		18,310
Total Liabilities and stockholders' Equity		22,510
YARD PROFESSIONALS INC.
Statement of Cash Flows
For the year ended Dec 31, 2018
Cash From Operating Activities:
Service Revenue	21500
Net Cash flow from Operating Activities		21500
Net Cash from Investing Activities		0
Net Cash from Financing Activities		0
Net Change in cash		21500
Beginning cash balance		0
Ending Cash Balance		21500

Solution c and d:

c.	Supplies	1010
d.	Supplies Expense	3190