Exercise 2-8B Effect of accruals on the financial statements 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 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. TALLEY INC. Accounting Equation Event No. Acct. Titles Assets Liabilities +Stockholders' Equity for Ret. Earn. Accounts Cash Receivable = Salaries Common Retained Payable + Stock Earnings 1. 20,000 NA NA + 20,000 NA b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for the Year I accounting period. c. Why is the amount of net income different from the amount of net cash flow from operating activities? Talley, Inc. Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 1 Beginning Common Stock $ -0- Ending Common Stock Beginning Retained Earnings $ -0- Ending Retained Earnings Total Stockholders' Equity Assets: Talley, Inc. Balance Sheet As of December 31, Year 1 Total Assets Liabilities: Total Liabilities Stockholders' Equity: Total Stockholders' Equity Total Liab. and Stockholders' Equity $53,500 Talley, Inc. Statement of Cash Flows For the Year Ended December 31, Year 1 Cash Flow From Operating Acts: Net Cash Flow from Operating Act. Cash Flow From Investing Acts: Cash Flow From Financing Acts.: Net Cash Flow from Financing Act. Net Change in Cash Ending Cash Balance 36,500 c. Net income is based on revenue of $ and expenses of $ for a net income of $ from operating activities is based on: cash $ and expenses from operating activities of $ of $ Net cash flow from revenue of for a net cash flow The difference of $ account ($ ), revenues account is reflected in the Accounts accrued but not yet, and the ($ ), expenses incurred but not yet_