Question

Supplies on financial statements Yard Professionals Inc. experienced the following events in 2016, its first year of operation: 1. Performed services for S35,000 cash. 2. Purchased $6,000 of supplies on account. 3. A physical count on December 31, 2016, found that there was $1,800 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 2016 accounting period. c. What is the balance in the Supplies account as of January 1, 2017? d. What is the balance in the Supplies Expense account as of January 1, 2017?

Answer 1

Answer:

cash    35,000 debit

  service revenue   35,000 credit

supplies   6,000 debit

     accounts payable   6,000 credit

supplies expense 4,200 debit

    suplies                      4,200 credit

b)

service revenue 35,000

supplies expense (4,200)

income                 30,800

cash flow:

35,000 generated from operating activities

balance sheet:

cash       35,000

supplies    1,800

total assets 36,800

liaiblities 6,000 A/P

equity 30,800

c) supplies account:  1,800

  6,000 - 4,200 = 1,800 It matches the inventory at hand as accounting represent reality

d) supplies expense: 0

expenses and revenue are temporary account are closed at year-end

Explanation:

a)

year-end adjustment for the consumption of supplies:

6,000 - 1,800 = 4,200