Question

Yard Professionals Inc. experienced the following events in 2018, its first year of operation:

1. Performed counseling services for $32,500 cash.
2. Purchased $8,000 of supplies on account.
3. A physical count on December 31, 2018, found that there was $1,550 of supplies on hand.

Required

Based on this information alone:

1. Record the events under an accounting equation.
2. Prepare an income statement, balance sheet, and statement of cash flows for the 2018 accounting period.
3. What is the balance in the Supplies account as of January 1, 2019?
4. What is the balance in the Supplies Expense account as of January 1, 2019?
   Yard Professionals Inc. experienced the following events in 2018, its first year of operation: 1. Performed counseling services for $32,500 cash. 2. Purchased $8,000 of supplies on account. 3. A physical count on December 31, 2018, found that there was $1,550 of supplies on hand. Required Based on this information alone: a. Record the events under an accounting equation. b. Prepare an income statement, balance sheet, and statement of cash flows for the 2018 accounting period. c. What is the balance in the Supplies account as of January 1, 2019? d. What is the balance in the Supplies Expense account as of January 1, 2019?
   

Answer 1

Requirement A: Record the events under accounting equation as follows

Event	Assets		=	Liabilities	+	Equity
	Cash	Supplies	=	Accounts Payable	+	Retained Earnings
1	$32,500		=		+	$32,500
2		$8,000	=	$8,000	+
3		($6,450)	=		+	($6,450)
Total	$32,500	$1,550	=	$8,000	+	$26,050

Note: Supplies expense is $6,450 ($8,000 − $1,550)

Requirement B1: Prepare the income statement as follows

YP Inc
Income Statement
For the Year Ended December 31, 2018
Particulars	Amount
Service revenue	$32,500
Deduct: Expenses	$6,450
Net income	$26,050

Requirement B2: Prepare the balance sheet as follows

YP Inc
Balance Sheet
December 31, 2018
Assets
Cash	$32,500
Supplies	$1,550
Total assets	$34,050
Liabilities
Accounts Payable	$8,000
Total liabilities	$8,000
Stockholders' Equity
Retained earnings	$26,050
Total liabilities and stockholders' equity	$34,050

Requirement B3: Prepare the cash flow statement as follows

YP Inc
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash flows from operating activities:	Amount
Cash from revenue	$32,500
Net cash flows from operating activities	$32,500
Net cash flows from investing activities	$0
Net cash flows from financing activities	$0
Net change in cash	$32,500
Add: Beginning cash balance	$0
Ending cash balance	$32,500

Requirement C: The balance in the supplies account on January 1, 2019 is $1,550.

Requirement D: The balance in the supplies expense account is "0" as this account is a temporary account and closed to income summary at the end of December 31, 2018.