Question

Edmondi_ \FAB_1_CHO_Working Papers (1) - Protected ViewSaved. Layout References Mailings Review View Help am the Internet con contain viruses. Unless you need to edit it's safe to stay in Protected View Enable Editing Exercise 2-5B Recording accounts receivable and other events in a horizontal financial LO 2-1, 2-2, 2-4 The Woodstock Shop experienced the following events during his first year of operations. Year 1: 1. Acquired 538.000 cathy common stock 2 Farned 10000 r e count. 3. Pald $25.000 cash for operating expenses Borrowed $15.000 cash from a bank Cected $25.000 othe r P 2000 Required Usa hormonal financiaments made to show b each e s the balance sheet income ment, and statement of cash flow. More specific record them e of the events into the model Ale, in the State of Cus c ythe ch e ating activities OA insting activities Alancing the Thet h an cumple Ince Statement of Cash Flows Rew Exp. Netine 38000FA EXERCISE 2-50 (cont.) Pre Backspace

Answer 1

b) Accounts receivables are amounts which the customers owe to the company and would appear in the balance sheet under ASSETS.

c) Balance of accounts receivable which will appear in the balance sheet at year 1 = $5000

d) Net income is the difference between income and expense and based on the below table, $5000 will be shown as net income.

e) Cash flow from operating activities refer to the cash received and spend related to the core operations of the company. Based on below table, Cash from operating activities at Year 1 = $0

f) Amounts are different in d and e because while calculating net income we follow accrual basis whereas while calculating cash flows we follow cash basis. Hence, in Income statement revenues are booked when they are generated and expenses are booked when they are incurred, in cash flow statement revenues and expenses will be accounted for only when cash has been received or paid.

Please comment in case of any issue and I will be happy to help.

Notes

The below table will help us answer all the questions

	BALANCE SHEET					INCOME STATEMENT			STATEMENT OF CASH FLOWS
	ASSETS		LIABILITIES	STK. EQUITY
Event	Cash	Accts. Rec.	Notes Payable	Common Stock	Retained Earnings	Revenues	Expenses	Net Income
1	$   38,000			$               38,000					$   38,000	FA
2		$     30,000			$                    30,000	$   30,000		$       30,000
3	$ -25,000				$                   -25,000		$ 25,000	$     -25,000	$ -25,000	OA
4	$   15,000		$               15,000						$   15,000	FA
5	$   25,000	$   -25,000							$   25,000	OA
6	$   -2,000				$                     -2,000				$   -2,000	FA
TOTAL	$   51,000	$       5,000	$               15,000	$               38,000	$                       3,000	$   30,000	$ 25,000	$         5,000	$   51,000