The Copy Center Inc. started the 2005 accounting period with \($8,000\) cash, \($6,000\) of common stock, and \($2,000\) of retained earnings. The Copy Center was affected by the following accounting events during 2005:

1. Purchased \($11,500\) of paper and other supplies on account.
2. Earned and collected \($27,000\) of cash revenue.
3. Paid \($10,000\) cash on accounts payable.
4. Adjusted the records to reflect the use of supplies. A physical count indicated that \($2,500\) of sup¬ plies was still on hand on December 31, 2005.

Required:

a. Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the 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:

Assets Event No. Cash + + Supplies 1 Beg. bal. 8,000 + 0 Liab. Stockholders' Equity Accts. Pay. + Com. Stk. + Ret. Earn. Rev. - Exp. = Net Inc. Cash Flows 0 + 6,000 + 2,000 0 1 - 0 = || 0 0