Laura Moss started and operated a small family consulting firm in Year 1. The firm was affected by two events: 

(1) Moss provided $36,000 of services on account, 

(2) she purchased $10,000 of supplies on account. 

There were $1,800 of supplies on hand as of December 31, Year 1.

Required
a. Open T-accounts and record the two transactions in the accounts.
b. Record the required year-end adjusting entry to reflect the use of supplies.
c. Show the above transactions in a horizontal statements model like the following one:

d. Explain why the amounts of net income and net cash flow from operating activities differ.
e. Record and post the required closing entries, and prepare a post-closing trial balance.

Transcribed Image Text:

Balance Sheet Income Statement = Llab. + Stk. Equity Statement of Cash Flows Assets Accts. Accts. Rec. + Supplles Ret. Earn. Pay. + Exp. Net Inc. Rev.