Question

Yard Professionals Inc. experienced the following events in 2018, its first year of operation: 1. Performed counseling services for $15,000 cash. 2. Purchased $6,000 of supplies on account. 3. A physical count on December 31, 2018, found that there was $1,250 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

Solution a:

YARD PROFESSIONALS INC.
Effect of Events on the Accounting Equation
Event		Assets		=	Liabilities	+	Stockholders’ Equity
		Cash	Supplies	=	Accounts Payable	+	Retained Earnings
1	Performed Counselling services	15000		=		+	15000
2	Purchase Supplies		6000	=	6000	+
3	Used Supplies (6000-1250)		-4750	=		+	-4750
Totals		15000	1250	=	6000	+	10250

Solution b:

YARD PROFESSIONALS INC.
Income Statement
For the year ended Dec 31, 2018
Service Revenue	15000
Less: Supplies expense	4,750
Net Income	10,250
YARD PROFESSIONALS INC.
Balance sheet
As of Dec 31, 2018
ASSETS:
Cash	15,000
Supplies	1,250
Total Assets		16,250
LIABILITIES:
Accounts Payable	6,000
Total Liabilities		6,000
Stockholders' Equity:
Retained Earnings	10,250
Total Stockholders' Equity		10,250
Total Liabilities and stockholders' Equity		16,250
YARD PROFESSIONALS INC.
Statement of Cash Flows
For the year ended Dec 31, 2018
Cash From Operating Activities:
Service Revenue	15000
Net Cash flow from Operating Activities		15000
Net Cash from Investing Activities		0
Net Cash from Financing Activities		0
Net Change in cash		15000
Beginning cash balance		0
Ending Cash Balance		15000

Solution c and d:

c.	Supplies	1250
d.	Supplies Expense	4750