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
<h3>Income Statement</h3>
For the Year 1 accounting period
Revenue $26,500
Supplies Expense (5,690)
Net income $20,810
Yard Professionals
<h3>Balance Sheet</h3>
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
<h3>Statement of Cash Flows</h3>
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 <u>$5,690</u>.
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