Question

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

1. Performed services for $26,000 cash.
2. Purchased $4,800 of supplies on account.
3. A physical count on December 31, Year 1, found that there was $1,040 of supplies on hand.

Required
Based on this information alone:

a. Record the events in general ledger accounts under an accounting equation.
b. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period.
c. What is the balance in the Supplies account as of January 1, Year 2?
d. What is the balance in the Supplies Expense account as of January 1, Year 2?

Req B Ind Stmt Req B Bal Sheet Req B Stmt of Cash Flows Req A Req C and D Record the events in general ledger accounts under an accounting equation. (Enter any decreases to account balances with minus sign.) YARD PROFESSIONALS INC Effect of Events on the Accounting Equation Assets Liabilities Stockholders Equity Retained Earnings Event SuppliesAccounts Payable Cash 1. Provided service 2. Purchased supplies 3. Used supplies Totals < Req A Req B Inc Stmt>

Answer 1

1) Effect of events on accounting equation :									4) Statement of cash flows
									For the year ended December 31, year 1
Event		Assets		=	Liabilities	+	Stock holders equity
		Cash	Supplies		Accounts payable		Retained earnings		Cash flow from operating activites
1	Provide service	$     26,000		=		+	$             26,000		Cash receipt from revenue	$26,000
2	purchased supplies		$      4,800	=	$           4,800	+			Net cash flow from operating activities		$    26,000
3	used supplies		$     (3,760)	=		+	$             (3,760)
		$     26,000	$      1,040		$           4,800		$             22,240		Cash flow from investing activities		0
2) Income Statement :									Cash flow from financing activities		0
	For the year ended december 31,Year 1
	Revenue	$     26,000							Net change in cash		$    26,000
	Net expense	$     (3,760)							Plus : Beginning cash balance		0
	Net income	$   22,240							Ending cash balance		$ 26,000
3)	Balance sheet
	As on December 31, year 1
								5)	Supplies		$     1,040
	Assets							6)	Supplies expense		0
	Cash	$     26,000
	Supplies	$      1,040
	Total assets		$   27,040						The balance on supplies expense account is 0 , because expense account was set off with retained earnings account.
	Liabilities
	Accounts payable	$      4,800
	Total liabilities	$      4,800
	Stock holders equity
	Retained earnings	$     22,240
	Total stock holders equity	$     22,240
	Total liabilities and stock holders equity		$   27,040