Talley Inc. experienced the following events in Year 1 in its first year of operation:
1. Received $20,000 cash from the issue of common stock.
2. Performed services on account for $38,000.
3. Paid the utility expense of $2,500.
4. Collected $21,000 of the accounts receivable.
5. Recorded $15,000 of accrued salaries at the end of the year.
6. Paid a $2,000 cash dividend to the shareholders.

Required
a. Record the events in general ledger accounts under an accounting equation. In the last column of the table, provide appropriate account titles for the Retained Earnings amounts. The first transaction has been recorded as an example.

b. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for the Year 1 accounting period.
c. Why is the amount of net income different from the amount of net cash flow from operating activities?

Transcribed Image Text:

TALLEY INC. General Ledger Accounts Acct. Titles Event No. Assets Accounts Recelvable Llabilities + Stockholders' Equity for Ret. Earn. Common Retalned Stock Salarles Payable Cash Earnings NA 1. 20,000 NA 20,000 NA