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    Effect of Events on the Accounting Equation

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    Valmont, Inc., experienced the following events in 2012, in its first year of operations.

    1. Received $20,000 cash from the issue of common stock.

    2. Performed services on account for $50,000.

    3. Paid the utility expense of $12,500.

    4. Collected $39,000 of the accounts receivable.

    5. Recorded $9,000 of accrued salaries at the end of the year.

    6. Paid a $5,000 cash dividend to the shareholders.


    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.

    b. Prepare the income statement, statement of changes in stockholder's equity, balance sheet, and statement of cash flows for the 2012 accounting period.

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

    The attached file has the details.

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    The solution discusses the effect of events on the accounting equation.