Answer:
a) Journal Entries
YEAR 1
Debit bank $10,000 Credit Common stock $10,000
Debit Accounts receivables $78,000 Credit Service revenue $78,000
Debit Bank $36,000 Credit Service Revenue $36,000
Debit Bank $69,000 Credit Accounts receivables $69,000
Debit Salary and wages expense $38,000 Credit bank $38,000
Debit Allowance for bad debts adjustments $450 Credit Allowance for bad debts $450
Year 2
Debit Bad debt $650, Credit Accounts receivable $650
Debit accounts receivable $88,000 Credit Service revenue $88,000
Debit Bank $32,000 Credit Service revenue $32,000
Debit Bank $81,000 Credit accounts receivables $81,000
Debit Allowance for bad debts adjustment $295 Credit Allowance for dab debts $295
b) Income statement year 1
Service Revenue (78,000+36000) $114,000
Deduct expenses
Salaries -$38,000
Allowance for bad debts adjustment -$450
Net income $75,550
STATEMENT OF CHANGES IN EQUITY
Common stock Retained earnings total
opening balance 0 0 0
Issued stock $10000 $10000
Net income $75,550 $75,550
closing balance $10000 $75,550 $85,550
BALANCE SHEET
ASSETS
Current Assets
Accounts receivable(9000-450) $8,550
Bank (10,000+36,000+69000-38000) $77,000
total Assets $85,550
EQUITY AND LIABILITIES
EQUITY
Common stock $10,000
Retained earnings $75,550
Total equity and liabilities $85,550
CASH FLOW STATEMENT
Cash Flow from operating Activities $67,000
Net Income $75,550
adjust non cash items $0
Income before changes in Working Capital
changes in working capital
Accounts receivable (0-8550) -8550
income generated from operations $67,000
Cash Flow from Financing Activities $10,000
common stock issued $10,000
cash surplus or deficit $77,000
opening cash balance $0
closing cash balance $77,000
Explanation:
