Question

Alcor Service Company was formed on January 1, 2018. Events Affecting the 2018 Accounting Period 1. Acquired $62,000 cash from the issue of common stock. 2. Purchased $1,600 of supplies on account. 3. Purchased land that cost $22,000 cash. 4. Paid $1,600 cash to settle accounts payable created in Event 2. 5. Recognized revenue on account of $46,000. 6. Paid $23,000 cash for other operating expenses. 7. Collected $40,000 cash from accounts receivable. Information for 2018 Adjusting Entries 8. Recognized accrued salaries of $3,400 on December 31, 2018 9. Had $400 of supplies on hand at the end of the accounting period. Events Affecting the 2019 Accounting Period 1. Acquired $22,000 cash from the issue of common stock. 2. Paid $3,400 cash to settle the salaries payable obligation 3. Paid $4,200 cash in advance to lease office space. 4. Sold the land that cost $22,000 for $22,000 cash. 5. Received $5,400 cash in advance for services to be performed in the future. 6. Purchased $1,200 of supplies on account during the year. 7. Provided services on account of $34,000. 8. Collected $35,000 cash from accounts receivable. 9. Paid a cash dividend of $7,000 to the stockholders. 10. Paid other operating expenses of $21,500. Information for 2019 Adjusting Entries 11. The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term. 12. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1. 13. Had $500 of supplies remaining on hand at the end of the period. 14. Recognized accrued salaries of $4,100 at the end of the accounting period. 15. Recognized $600 of accrued interest revenue.

Answer 1

Liabilties Interest Accounts Salaries Unearned Receivable = Payable Payable Revenue + Stockholders Equity Common Retained + Stock + Earnings + 62,000 + Land Calculation 1,600 1,600 + + 22,000 + + Alcorn Service Company 2018 Assets Accounts Prepaid Events Type Cash Receivable Supplies Rent 1 AS 62,000 2 AS 3 | AE (22,000) AU (1,600) 46,000 AU (23,000) 7 AE 40,000 (40,000) 8 CE 9 AU (1,200) Totals 55,400 6,000 400 (1,600) + + + + 46,000 (23,000) Service Revenue Other operating expenses + + + + 3,400 + + (3,400) (1,200) =1,600-400 18,400 Salaries expense Supplies expense + 22,000 3,400 + 62,000 + 2019 Assets Liabilties + Stockholders Equity Calculation + AU + + + + + + + + + + Accounts Prepaid Interest Accounts Salaries Unearned Common Retained Events Type Cash Receivable Supplies Rent Land Receivable = Payable Payable Revenue + Stock + Earnings Bal. 55,400 6,000 400 - 22,000 3,400 + 62,000 + 18,400 1 AS 22,000 22,000 + (3,400) (3,400) (4,200) 4,200 22,000 (22,000) 5 AS 5,400 5,400 1,200 1,200 34,000 34,000 35,000 (35,000) (7,000) (7,000) 10 AU (21,500) (21,500) 11 AU (3,500) (3,500) 12 CE (1,350) 1,350 13 AU (1,100) (1,100) 14 CE 4,100 (4,100) 15 AS 600 Totals 103,700 5,000 500 700 - 600 = 1,200 4,100 4,050 + 84,000 + 17,150 + + Service Revenue + + + + + + + + + + =4,200/12*10 =5,400/12*3 =400+1,200-500 Dividends Other operating expenses Rent expense Service Revenue Supplies expense Salaries expense Interest Revenue + + + + 600 = + + Simple explanation Asset source is increase in assets Asset use is decrease in assets Asset exchange is exchange of one asset for another asset Claims exchange is no change in asset, meaning exchange of liabilty for equity

2018 2019 46,000 35,350 600 35,950 46,000 Alcorn Service Company Income Statement For the Years Ended December 31, 2018 and 2019 Revenues Service Revenue Interest Revenue Total Revenues Expenses Other operating expense Salaries expense Supplies expense Rent expense Total Expenses Net Income 23,000 3,400 1,200 21,500 4,100 1,100 3,500 30,200 5,750 27,600 18,400 2018 62,000 62,000 Statement of Changes in Stockholders Equity For the Years Ended December 31, 2018 and 2019 Beginning Common Stock Issue of common stock Ending Common Stock Beginning Retained Earnings Add: Net Income Less: Dividends Ending Retained Earnings Total Stockholders Equity 2019 62,000 22,000 84,000 18,400 5,750 (7,000) 17,150 101,150 18,400 18,400 80,400

2018 2019 Alcorn Service Company Balance Sheet As of December 31, 2018 and 2019 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Rent Interest Receivable Total Current Assets 55,400 6,000 400 103,700 5,000 500 700 600 110,500 61,800 Fixed Assets Land Total Assets 22,000 83,800 110,500 Liabilities & Stockholders Equity Liabilities Accounts Payable Salaries Payable Unearned Revenue Total Liabilities 3,400 1,200 4,100 4,050 9,350 3,400 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 62,000 18,400 80,400 83,800 84,000 17,150 101,150 110,500

Alcorn Service Company Cashflow Statement For the Years Ended December 31, 2018 and 2019 Calculation 2019 2018 2019 Cash flows from Operating Activities Cash receipts from customers Cash payments to creditors Cash payments for other operating expenses Net Cash flow from Operating Activities 35000 + 5400 -3400+ -4200 40,000 (1,600) (23,000) 15,400 40,400 (7,600) (21,500) 11,300 (22,000) Cash flows from Investing Activities Purchase of Land Proceeds from sale of land Net Cash flow from Investing Activities 22,000 22,000 (22,000) 62,000 Cash flows from Financing Activities Proceeds from issue of common stock Dividends paid Net Cash flow from Financing Activities 22,000 (7,000) 15,000 62,000 55,400 Net Change in Cash Beginning Cash Balance Ending Cash Balance 48,300 55,400 103,700 55,400