Tony’s Business is a small retailer that began operations on January 1, 2017. During 2017, the following transactions occurred:
1. Tony contributed $20,000 of his own money to the business.
2. $60,000 was borrowed from the bank.
3. Property, plant, and equipment were purchased for $25,000 cash.
4. Inventory was purchased: $25,000 cash and $15,000 on account.
5. Inventory with a cost of $25,000 was sold for $80,000: $20,000 cash and $60,000 on account.
6. Cash payments included $18,000 for operating expenses, $5,000 for notes payable, and a $2,000 dividend.
7. $15,000 in expenses were accrued at the end of the year, and depreciation expense of $1,000 was recorded.
a. Prepare journal entries for each economic event.
b. Prepare a balance sheet as of the end of 2017 and an income statement and statement of shareholders’ equity for Tony’s business.
c. Prepare a cash T-account and a statement of cash flows using the direct method.
d. Prepare a statement of cash flows using the indirect method, but this time prepare it from the company’s two balance sheets, the income statement, and the statement of shareholders’ equity. Tony’s first balance sheet contains all zero balances.