Effect of deferrals on financial statements: three separate single-cycle examples

Required

a. On February 1, 2010, Moore, Inc., was formed when it received $70,000 cash from the issue of common stock. On May 1, 2010, the company paid $42,000 cash in advance to rent office space for the coming year. The office space was used as a place to consult with clients. The consulting activity generated $80,000 of cash revenue during 2010. Based on this information alone, record the events and related adjusting entry in the general ledger accounts under the accounting equation. Determine the amount of net income and cash flows from operating activities for 2010.

b. On January 1, 2010, the accounting firm of Wayne & Associates was formed. On August 1, 2010, the company received a retainer fee (was paid in advance) of $36,000 for services to be performed monthly during the next 12 months. Assuming that this was the only transaction completed in 2010, prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2010.

c. Hal Company had $1,250 of supplies on hand on January 1, 2011. Hal purchased $6,500 of supplies on account during 2011. A physical count of supplies revealed that $1,500 of supplies was on hand as of December 31, 2011. Determine the amount of supplies expense that should be recognized in the December 31, 2011 adjusting entry. Use a financial statements model to show how the adjusting entry would affect the balance sheet, income statement, and statement of cash flows.