Hamby Inc. experienced the following events in 2006, in its first year of operation.

1. Received \($15,000\) cash from the issue of common stock.

2. Performed services on account for \($48,000\).

3. Paid the utility expense of \($1,250\).

4. Collected \($36,000\) of the accounts receivable.

5. Recorded \($8,000\) of accrued salaries at the end of the year.

6. Paid a \($1,000\) 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 2006 accounting period.

c. Why is the amount of net income different from the amount ofnet cash flow from operating activities?

Transcribed Image Text:

Event Assets Accounts Cash Receivable 1. 15,000 HAMBY INC. General Ledger Accounts Acct. Titles = Liabilities + Stockholders' Equity for Ret. Earn. Salaries Payable Common Retained Stock Earnings 15,000