The following accounting events apply to Mary's Designs for the year Year 1: Asset Source Transactions 1. Began operations by acquiring $19,000 of cash from the issue of common stock. 2. Performed services and collected cash of $1,450. 3. Collected $4,650 of cash in advance for services to be provided over the next 12 months. 4. Provided $12,600 of services on account 5. Purchased supplies of $390 on account. Asset Exchange Transactions 6. Purchased $4,800 of land for cash. 7. Collected $8,500 of cash from accounts receivable. 8. Purchased $480 of supplies with cash. 9. Paid $4,100 for one year's rent in advance. Asset Use Transactions 10. Paid $3,000 cash for salaries of employees. 11. Paid a cash dividend of $2,300 to the stockholders. 12. Paid $390 of the accounts payable with cash. Claims Exchange Transactions 13. Placed an advertisement in the local newspaper for $120 on account. 14. Incurred utility expense of $110 on account. Adjusting Entries 15. Recognized $3,488 of revenue for performing services. The collection of cash for these services occurred in a prior transaction. (See Event 3.) 16. Recorded $1,190 of accrued salary expense at the end of Year 1. 17. Recorded supplies expense. Had $135 of supplies on hand at the end of the accounting period. 18. Recognized three months of expense for prepaid rent that had been used up during the accounting period. Required a. Record each of the preceding events in T-accounts. Cash Accounts Receivable Beg. Bal Beg. Bal > End.Bal End. Bal Prepaid Rent Land Beg. Bal Beg. Bal End. Bal End. Bal Accounts Payable Unearned Revenue Beg. Bal Beg. Bal > End. Bal End. Bal Salaries Payable Common Stock Beg. Bal Beg. Bal End. Bal End. Bal Dividends Service Revenue Beg. Bal Beg. Bal End. Bal End. Bal Advertising Expense Rent Expense Beg. Bal Beg. Bal End. Bal End. Bal Salary Expense Supplies Expense Beg. Bal Beg. Bal > End. Bal End. Bal Utilities Expense Supplies Beg. Bal Beg Bal PI End. Bal End. Bal b. Prepare a before closing trial balance. MARY'S DESIGNS Before-Closing Trial Balance December 31, Year 1 Account Titles Debit Credit Total $ 0 S 0 c. Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (+), decreases (-), or does not affect (NA) each element of the financial statements. Also, in the Cash Flow column, use the letters OA to designate operating activity, IA for investing activity, and FA for financing activity. The first event is recorded as an example. MARY'S DESIGNS Effect of Transactions on Financial Statements Balance Sheet Income Statement Statement of Cash Flows Event Assets Liabilities Equity Revenue Expenses = Net Income 1. NA + + NA NA NA FA 2. + + 3. 4. 5. + + = 6. + 7. + 8. + > + 9. 10. 11. + + = 12. > + = 13. + = 14. + 15. + 16. + 17. + 18. +
