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ACCT 2003 Fall 2018 Homework 4 You are required to submit homework through the Connect system. Most of those problems are algorithmic based, meaning each student will have different versions of the same problem. The facts in this worksheet are taken from the problems as presented in the textbook. Bring them with you to class and Friday study sessions as extra time may be used to discuss the homework assignment based on the facts contained in the textbook. E2-3 Milea Inc, experienced the following events in 2018, its first year of operations: 1. Received $20.000 cash from the issue of common stock. 2. Performed services on account for $56,000. 3. Paid the utility expense of $2.500. 4. Collected $48.000 of accounts receivable. 5. Recorded $10,000 of accrued salaries at the end of the year. 6. Paid a $2,000 cash dividend to the stockholders. Required: a. Record the events in general ledger accounts under an accounting equation. In the last column of the table, provide appropriate account titles for the Retained Earnings accounts. Event = Acct. Titles for RE Assets Accounts Receivable Liabilities + Salaries Payable Stockholders' Equity Common Retained Stock Earnings Cos 1. Issue stock 2. Svcs on account 3. Pay utility expense 4. Collect A/R 5. Accrue salaries 6. Paid dividend Balance 12/31/2018 b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for the 2018 accounting period. c. Why is the amount of net income different from the amount of net cash flow from operating activities?

Answer 1

Connect Systems
general ledger accounts
for the year ended Dec 31, 2018
	event	assets ($)	=	liabilities ($)	stockholders equity ($)
	cash	accounts receivable		salaries payable	common stock	retained earnings	acct. title for RE
1	issue stock	20000				20000
2	service on account		56000				56000	revenue
3	utility expense paid	-2500					-2500	utility expense
4	collect accounts receivable	48000	-48000
5	accrued salaries				10000		-10000	salary
6	paid dividend	-2000					-2000	dividend
	totals	63500	8000	=	10000	20000	41500

Connect Systems
income statement
for the year ended Dec 31, 2018
amount in $
revenue		56000
less:expenses:
utility expense	2500
salary expense	10000
total expenses		12500
net income		43500

Connect Systems
statement of changes in stockholders equity
for the year ended Dec 31, 2018
amount in $
beginning of common stock	0
add:common stock issued	20000
ending common stock		20000
beginning retained earnings	0
add:net income	43500
less:dividend	-2000
ending retained earnings		41500
total stockholders equity		61500

Connect Systems
balance sheet
as of Dec 31, 2018
amount in $
assets:
cash	63500
accounts receivable	8000
total assets		71500
liabilities:
salaries payable	10000
total liabilities		10000
stockholders equity:
common stock	20000
retained earnings	41500
total stockholders equity		61500
total liabilities and stockholders equity		71500

Connect Systems
statement of cash flows
for the year ended Dec31, 2018
cash flow from operating activities
cash received from customers	48000
expenses paid	-2500
net cash flow from operating activities		45500
cash flow from investing activities		0
cash flow from financing activities
common stock issued	20000
dividend paid	-2000
net cash flow from financing activities		18000
net change in cash		63500
beginning cash balance		0
ending cash balance		63500

Net income is the difference between total revenue (cash and credit) and expenses. Whereas net cash flow from operating activities is the difference between actual cash generated and cash paid for operating activities.

In the given question, total revenue generated was $56,000 but only $48,000 could be collected. Whereas, total expenses incurred was $12,500 but only $2,500 was paid.