Handy Andy Inc. began the Year 1 accounting period with $9,000 cash, $5,000 of common stock, and $4,000 of retained earnings. Handy Andy was affected by the following accounting events during Year 1:
1. Purchased $9,500 of operating expenses supplies on account.
2. Earned and collected $32,500 of cash revenue.
3. Paid $7,200 cash on accounts payable.
4. Adjusted the records to reflect the use of supplies. A physical count indicated that $1,700 of supplies was still on hand on December 31, Year 1.

Required
a. Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Statement of Cash Flows column, use OA to designate operating activity, IA for investing activity, FA for financing activity, and NC for net change in cash. Use NA to indicate accounts not affected by the event. The beginning balances are entered in the following example:

b. Explain the difference between the amount of net income and amount of net cash flow from operating activities.

Transcribed Image Text:

Balance Sheet Income Statement Statement Assets Llab. of Cash + Stockholders' Equity Ret. Accts. Pay. + Com. Stk. + Earn. Event No. Flows Cash + Supplles Rev. Exp. = Net Inc. 5,000 Beg. bal. 9,000 + + 4,000