Respuesta :
Answer and Explanation:
Life Inc.
Statement of Cash Flows
For Year Ended December 31, 2018
A. Effect of events on Accounting Equation
S. no. Event Assets = Liabilities +
Stockholders' Equity
Cash Prepaid Rent = Retained Earnings
1. Performed
Counseling
services $21,200 $21,200
2. Prepaid Rent -$14,400 $14,400
3. Used Rent -$13,200 -$13,200
($14,400 × 11 ÷ 12)
Total $6,800 $1,200 $8,000
B. The preparation of Income statement is prepared below:-
Life Inc.
Income statement
For the year 1
Particulars Amount
Service Revenue $21,200
Rent Expense -$13,200
Net Income $8,000
Life Inc.
Balance Sheet
For the year 1
Particulars Amount
Assets:
Cash $6,800
Prepaid Rent $1,200
Total Assets $8,000
Liabilities & Stockholder's Equity:
Retained Earnings $8,000
Total liabilities and
Stockholder's Equity $8,000
Life Inc.
Statement of Cash Flows
For Year 1
Particulars Amount
Cash Flows from operating activities:
Cash received from
customers $21,200
Cash paid for rent -$14,400
Net Cash provided by operating
activities $ 6,800
Cash flow from investing
activities $0.00
Cash flow from financing
activities $0.00
Net Increase (Decrease) in
Cash $6,800
Cash balance at the beginning
of year $0.00
Cash balance at end of year $6,800
c. The computation of the amount of rent expense that would be recognized in Year 2 is shown below:-
Amount of rent expense that will be recognized in Year 2 = Ending balance in prepaid rent = $1,200
