The following transactions pertain to Smith Training Company for Year1 Jan. 30 E

Question

The following transactions pertain to Smith Training Company for Year1 Jan. 30 Established the business when it acquired $51,000 cash from the issue of common stock Feb 1 Paid rent for office space for two years, $15,500 cash Apr 10 Purchased $700 of supplies on account. July 1 Received $22,500 cash in advance for services to be provided over the next year 20 Paid $525 of the accounts payable from April 10. Aug. 15 Billed a customer $10,200 for services provided during August. Sept. 15 Completed a job and received $3,000 cash for services rendered. Oct. 1 Paid employee salaries of $37,000 cash. 15 Received $9,100 cash from accounts receivable. Nov. 16 Billed customers $38,500 for services rendered on account Dec 1 Paid a dividend of $1,000 cash to the stockholders 31 Adjusted records to recognize the services provided on the contract of July 1. 31 Recorded $2,350 of accrued salaries as of December 31. 31 Recorded the rent expense for the year. (See February 1.) 31 Physically counted supplies; $120 was on hand at the end of the period d. Prepare an income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Year 1 Round your final answers to the nearest whole dollar amount. Statement of Cash Flows only, items to be deducted must be indicated with a negative amount.) SMITH TRAINING COMPANY Financial Statements For the Year Ended December 31, Year1 Income Statement Expenses Total expenses 0 Statement of Changes in Stockholders' Equity Total Stockholders' Equity 0

Explanation / Answer

To prepare the financial statements we would first pass the journal entries 30-Jan Cash $51,000 To Common Stock $51,000 (Being common stock issued for cash) 1-Feb Rent Expense $15,500 To Cash $15,500 (Being rent for office expense paid for two years) 10-Apr Supplies $700 To Accounts Payable $700 (Being Supplies purchased on account) 1-Jul Cash $22,500 To Advance Received $22,500 (Being advance received for services to be provided next year) 20-Jul Accounts Payable $525 To Cash $525 (Being cash paid on account for purchase of supplies) 15-Aug Accounts Receivable $10,200 To Services provided $10,200 (Being services provided) 15-Sep Cash $3,000 To Services provided $3,000 (Being services provided) 1-Oct Employee Salaries $37,000 To Cash $37,000 (Being employee salary paid in cash) 15-Oct Cash $9,100 To Accounts Receivable $9,100 (Being cash received from debtors) 16-Nov Accounts Receivable $38,500 To Services provided $38,500 (Being services provided) 1-Dec Dividend $1,000 To Cash $1,000 (Being dividend paid in cash) 31-Dec Employee Salaries $2,350 To Accrued Employee salaries $2,350 (Being accrued salary recorded) 31-Dec Prepaid Rent 7750 To Rent Expense 7750 (Being adjustment done for prepaid rent) 31-Dec Supplies Expense $580 To Supplies $580 (Being Supplies recorded on hand) Smith TrainingCompany Financial Statements For the year Ended December 31, Year 1 Income Statement Revenue $51,700 Expenses Supplies Expense $580 Employee Salaries $39,850 Rent $7,750 $48,180 Net Profit $3,520 Dividend Paid $1,000 Trf to Retained Earnings $2,520 Statement of Changes in Stockholders Equity Common Stock $51,000 Add : Profit for the year $2,520 Total Stockholders Equity $53,520 Balance Sheet as on December 31, Year 1 Assets Current Assets Cash $31,075 Accounts Receivable $39,600 Supplies Inventory $120 Prepaid Rent $7,750 Total Assets $78,545 Liabilities and Equity Accounts Payable $175 Advance received $22,500 Accrued Employee Salary $2,350 Total Current Liabilities $25,025 Stockholders Equity $53,520 Total Liabilities and Equity $78,545 Statement of Cash flows, Year 1 Cash flow from operating activity Net Profit $3,520 Increase in Receivables ($39,600) Increase in Supplies Inventory ($120) Increase in prepaid rent ($7,750) Increase in Accounts Payable $175 Increase in advance $22,500 Increase in accrued employee Salary $2,350 Net flow from operations ($18,925) Cash flow from financing activity Issue of common Stock $51,000 Dividend paid ($1,000) Net flow from financing activity $50,000 Net Cash flow $31,075

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