The following events apply to 2005, the first year ofoperations of ITS Consultin

Question

The following events apply to 2005, the first year ofoperations of ITS Consulting Services 1. Acquired $20, 000 cash from the issue of common stock 2. Paid $12, 000 cash in advance from the issue of commonstock 3. provided services for $25,000 cash 4. Adjusted the records to recognize the use of the officespace. The one-year contract started on March 1, 2005. Theadjusment was made as of December 31, 2005 A. write an accounting equation and record the effects of eachaccounting event under the appropriate general ledger accountheadings. B. prepare an income statement and statement of cash flows forthe 2005 accounting period. C. explain the difference between the amount of net income andamount of net cash flow from operating activities. The following events apply to 2005, the first year ofoperations of ITS Consulting Services 1. Acquired $20, 000 cash from the issue of common stock 2. Paid $12, 000 cash in advance from the issue of commonstock 3. provided services for $25,000 cash 4. Adjusted the records to recognize the use of the officespace. The one-year contract started on March 1, 2005. Theadjusment was made as of December 31, 2005 A. write an accounting equation and record the effects of eachaccounting event under the appropriate general ledger accountheadings. B. prepare an income statement and statement of cash flows forthe 2005 accounting period. C. explain the difference between the amount of net income andamount of net cash flow from operating activities.

Explanation / Answer

This should first be posted as journal entries to identifyeach T account before preparing an income statement. Example:                                                      Debit                  Credit 1. Issue of CommonStock                                  OwnersEquity                                       20,000      ABC BankAccount  (Cash)                                           20,000 2. Cashadvance                                  ABC BankAccount                              12,000       Cash Advances(WHO?)                                                12,000 Each account should be listed as Journal Entry with sub-titlesto T accounts after posting to JE then Credit T- accounts - ThenPrepare Income Statement It is difficult to complete without all relevant data todetermine accuracy of account records. Hope this helps you to start on the problem...

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