5 provided 2800 of consulting services to clients on

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5. Provided $2,800 of consulting services to clients on account. 6. Collected $2,200 of the receivables due from customers. 7. Recognized $1,750 of accrued operating expenses, other than supplies and insurance, that were charged on account (record the liability in accounts payable). 8. Paid suppliers $900 of the amount owed on the accounts payable. 9. On November 1, 2011, Sanders collected $2,880 cash in advance for services to be provided to a client under a one-year contract. 10. Paid dividends of $200 to the stockholders. 11. Purchased additional land for $2,460 cash. Adjusting Entries: 12. Recognized supplies expense. Based on a physical count, there were $20 of supplies on hand at the close of business on December 31, 2011. 13. Recognized insurance expense for ten months. 360/12 = 30 month x 10 = 300 used 14. Recognized income earned on the service contract described in Event No. 9. 2880/12 = 240 per month x 2 = 480 earned in 2011 Required 1. Record the events in ledger account balances under an accounting equation. 2. Prepare an income statement, a statement of retained earnings, a balance sheet, and a statement of cash flows for 2011. 2-5
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Chapter 02 - Understanding the Accounting Cycle WORK PAPERS FOR DEMONSTRATION PROBLEMS Demonstration Problem Ledger Account Balances 2011 Ledger Account Balances Assets = Liabiliti es + Equity Cash Prepaid Ins. Unearned Rev . Com. Stock Ret. Ear . +$3,000 +$3,000 Bal. $60 Bal. $2,400 Consult. Rev . Land Accts. Pay . Bal. $3,280 Bal. $4,460 Bal. $850 Oper. Exp . Bal. $2,060 Supplies Exp . Accts. Rec. Insurance Exp . Bal. $600 Supplies Dividends Bal. $20 $950 end RE Total Assets = Total Liab. + Total Stockho lders’ Equity $7,200 = $3,250 + $3,950 2-6
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Chapter 02 - Understanding the Accounting Cycle Demonstration Problem Financial Statements Income Statement for the Year 2011 Consulting Revenue Total Expenses Net Income +$1,150 Statement of Changes in Stockholders’ Equity Beginning Common Stock $ -0- Plus: Common Stock Issued Ending Common Stock Beginning Retained Earnings Plus: Net Income Less: Dividends Ending Retained Earnings Total Stockholders’ Equity $3,950 Balance Sheet as of December 31 Assets Cash +$2,060 Accounts Receivable Supplies Prepaid Insurance Land Total Assets $7,200 Liabilities Unearned Revenue Accounts Payable Total Liabilities $3,250 Stockholders’ Equity Common Stock Retained Earnings Total Stockholders’ Equity $3,950 Total Liabilities and Stockholders’ Equity $7,200 2-7
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Chapter 02 - Understanding the Accounting Cycle Demonstration Problem (Continued) Statement of Cash Flows 2011 Cash Flows from Operating Activities Cash Receipts from Consulting Revenue Cash Payments for Expenses
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