Question

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

Answer 1

1. Recording the events under an accounting equation is as follows:

                      Assets      =  Liabilities +  Equity

             Cash  +   Supplies              Common Stock + Revenue - Expenses    

1.          $26,500                                                             $26,500

2.                           $7,200   $7,200

3.                            (5,690)                                                                  ($5,690)

Balance $26,500  $1,510   $7,200                             $26,500   -     $5,690

2. The preparation of the income statement, balance sheet, and statement of cash flows for the Year 1 accounting period is as follows:

Yard Professionals

Income Statement

For the Year 1 accounting period

Revenue                 $26,500

Supplies Expense     (5,690)

Net income             $20,810

Yard Professionals

Balance Sheet

Year 1 accounting period

Cash                               $26,500

Supplies                             $1,510

Total assets                    $28,010

Accounts Payable           $7,200

Equity: Net income          20,810

Total liabilities + equity $28,010

Yard Professionals

Statement of Cash Flows

For the Year 1 accounting period

Net income               $20,810

Supplies                        (1,510)

Accounts Payable       7,200

Cash (Operations)  $26,500

3. The balance in the Supplies account as of January 1, Year 2 is $1,510.

4. The balance in the Supplies Expenses account as of January 1, Year 2 is $5,690.

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