Effect of supplies on the financial statementsGreen Copy Service, Inc., started the 2012 a...

Effect of supplies on the financial statements

Green Copy Service, Inc., started the 2012 accounting period with $16,000 cash, $10,000 of common stock, and $6,000 of retained earnings. Green Copy Service was affected by the following accounting events during 2012.

1.Purchased $9,600 of paper and other supplies on account.

2.Earned and collected $39,000 of cash revenue.

3.Paid $7,000 cash on accounts payable.

4.Adjusted the records to reflect the use of supplies. A physical count indicated that $2,200 of supplies was still on hand on December 31, 2012.

Required

a. Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Cash Flows column, use OA to designate operating activity, IA for investing activity, FA for financing activity, and NC for net change in cash. Use NA to indicate accounts not affected by the event. The beginning balances are entered in the following example.

b. Explain the difference between the amount of net income and amount of net cash flow from operating activities.