Effect of supplies on the financial statementsPackage Express started the 2011 accounting...

Effect of supplies on the financial statements

Package Express started the 2011 accounting period with $2,000 cash, $1,200 of common stock, and  $800 of retained earnings. Package was affected by the following accounting events during 2011:

1. Purchased $2,400 of copier toner and other supplies on account.

2. Earned and collected $10,800 of cash revenue.

3. Paid $1,800 cash on accounts payable.

4. Adjusted the records to reflect the use of supplies. A physical count indicated that $200 of supplies was still on hand on December 31. 2011.

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.