Exercise 2-15A
Life Inc. experienced the following events in 2016, its first year or operation
1. Performed counseling services for 36,000 cash.
2. On February 1, 2016, paid $18,000 cash for rent office space for the coming year.
3. Adjusted the accounts to reflect the amount of rent used during the year.
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 flow for 2016 accounting period.
c. Ignoring all other future events, what is the amount or rent expense that would be recognized in 2017.
Exercise 2-19A
Hart, Attorney at Law, experienced the following transactions in 2016, the first year of operations:
1. Accepted 36,000 on April 1, 2016. As retainer for services to be performed evenly over the next 12 months.
2. Performed legal services for cash of 54,000
3. Purchased 28,00 of office supplies on account.
4. Paid 2,400 of amount due on accounts payable.
5. Paid a cash dividend on the stockholders of 5,000.
6. Paid cash for operating expenses od 31,000.
7. Determined that at the end of the accounting period $200 of office supplies remained on hand.
8. On December 31, 2016 recognized the revenue that had earned for services performed in accordance with Transaction 1.
Exercise 2-27A Effects of accounting events on the income statement and statement of cash flows
Required
Explain how each of the following events or series of events and the related adjusting entry will affect the amount of net income and the amount of cash flow from operating activities reported on the year-end financial statements =. Identify the direction of change (increase, decrease, or NA) and the amount of change. Organize your answers according to the following table. The first event is recorded as an example. If an event does not have a related adjusting entry, record only the effects of the event.
Net Income Cash Flows from Operating Activities
Event Adjustment Direction of Change Amount of Change Direction of Change Amount of Change
A
Adj NA
Decrease NA
2,250 Decrease
NA 9,000
NA
a. Paid $9,000 CASH October 1 to purchase a one-year insurance policy
b. Purchased $2,000 of supplies on account. Paid $500 cash on accounts payable. The ending balance in the supplies account. After adjustments, was $300.
c. Provides service for $10,000 cash.
d. Collected $2,400 in advance for service to be performed in the future. The contract called for service to start May 1 and to continue for one year.
e. Accrued salaries amounting to $5,600.
f. Sold land that cost $3,000 for $3,000 cash.
g. Acquired $15,000 cash from the issue of common stock.
h. Earned $12,000 of revenue on account, collected $8,000 cash from accounts receivable.
i. Paid cash operating expense of $4,500.
Exercise 2-29A Identify source, use, and exchange transactions
Required
Indicate whether each of the following transactions is an asset source (AS), asset use (AU), asset exchange (AE) or claim exchange (CE) transaction.
a. Acquired cash from the issue of stock.
b. Paid a cash dividend to the stockholders.
c. Paid cash on accounts payable,
d. Incurred other operating expenses on account
e. Paid cash for rent expense.
f. Performed services for cash.
g. Performed services for clients on account
h. Collected cash from accounts receivable.
i. Received cash from services to be performed in the future
j. Purchased land with cash
Exercise 2-30A Identify asset source, use, and exchange transactions
Required
a. Name an asset use transaction that will not affect the income statement.
b. Name an asset exchange transaction that will affect the statement of cash flows.
c. Name an asset source transaction that will not affect the income statement.
d. Name an asset source transaction that will not affect the statement of cash flows.
e. Name an asset source transaction that will affect the income statement.