Question

Mailings Review View Help ses. Unless you need to edit, it's safer to stay in Protected View Enable Editing LO 2-2,2-3, 2-4 Exercise 2-88 Elefaccrue the neces They los experienced the wing events in Your 1 in your operation 1. Recived $20,000 cash from the common stock 2. Performed services on sccount for $38.000 3. Puld the t ype of $2.500. 4. Collected $21.000 of the accounts receivable 5. Recorded $15.000 of crud salaries at the end of the year 6. Pada $2.000 cash dividend to the shareholders Required Record the creation callediger counts under an accounting on. In the last column of the provide protect s for the Retained Earningsman. The instrum has been d e TALLEY INC. General Ledger Accounts Meet The for Rut. Eam Labies Stockholders Accounts Receivable Sa Payable Common Rated Stock Camings - 20.000 Talley, Inc. General Ledger Accounts for the Year Ended December 31, Year 1 Assets = Liabilities + Stockholders' Equity Accts. Rec. Salaries Pay. Event Cash 20,000 Common Retained Acct. Title Stock Earnings for RE 20,000 ils 36,500 17,000 - 15,000 - 20,000 18,500

Answer 1

Requirement a:

Talley, Inc.
General Ledger Accounts for the Year Ended December 31, Year 1
	Assets		=	Liabilities	+	Stockholders' Equity
Event	Cash	Accounts Receivable	=	Salaries Payable	+	Common Stock	Retained Earnings	Acct. Titls for RE
1	$20,000					$20,000
2		$38,000					$38,000	Service revenue
3	($2,500)						($2,500)	Utilities expense
4	$21,000	($21,000)
5				$15,000			($15,000)	Salaries expense
6	($2,000)						($2,000)	Dividends
Totals	$36,500	$17,000	=	$15,000	+	$20,000	$18,500

Requirement b:

Talley Inc.
Income statement
Revenues:
Service revenue (A)		$38,000
Expenses:
Utilities expense	$2,500
Salaries expense	$15,000
Total expenses (B)		$17,500
Net income (A-B)		$20,500

Talley Inc.
Statement of changes in stockholders' equity
	Common stock	Retained earnings	Total
Beginning, Year 1	$0	$0	$0
Issued common shares	$20,000		$20,000
Net income		$20,500
Dividends		($2,000)
Ending, Year 1	$20,000	$18,500	$38,500
Talley Inc.
Balance Sheet
Assets
Cash		$36,500
Accounts receivable		$17,000
Total assets		$53,500
Liabilities and stockholders' equity:
Salaries payable		$15,000
Stockholders'equity:
Common stock	$20,000
Retained earnings	$18,500
Total stockholders' equity		$38,500
Total liabilities and stockholders' equity		$53,500

Talley Inc.
Cashflow statement (Direct method)
Cash flow from operating activities:
Collections from customers	$21,000
Payment for utilies	($2,500)
Net Cash flow from operating activities		$18,500
Cash flow from investing activities:
Net Cash flow from investing activities		$0
Cash flow from financing activities:
Issuance of commons stock	$20,000
Payment for cash dividends	($2,000)
Net Cash flow from financing activities		$18,000
Net increase/(decrease) in cash		$36,500
Beginning cash balance		$0
Ending cash balance		$36,500

Requirement c:

Net income is different from cash flow from operating income because net income includes both cash items and non cash items where as cash flow from operating activities having operating cash flows only.