Question

Required information

[The following information applies to the questions displayed below.]

Alcorn Service Company was formed on January 1, 2018.

Events Affecting the 2018 Accounting Period

1. Acquired $80,000 cash from the issue of common stock.

2. Purchased $5,200 of supplies on account.

3. Purchased land that cost $58,000 cash.

4. Paid $5,200 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $82,000.

6. Paid $41,000 cash for other operating expenses.

7. Collected $58,000 cash from accounts receivable.

Information for 2018 Adjusting Entries

8. Recognized accrued salaries of $5,200 on December 31, 2018.

9. Had $2,200 of supplies on hand at the end of the accounting period.

  

Events Affecting the 2019 Accounting Period

1. Acquired $40,000 cash from the issue of common stock.

2. Paid $5,200 cash to settle the salaries payable obligation.

3. Paid $9,600 cash in advance to lease office space.

4. Sold the land that cost $58,000 for $58,000 cash.

5. Received $10,800 cash in advance for services to be performed in the future.

6. Purchased $3,000 of supplies on account during the year.

7. Provided services on account of $52,000.

8. Collected $53,000 cash from accounts receivable.

9. Paid a cash dividend of $6,000 to the stockholders.

10. Paid other operating expenses of $39,500.

  

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 $2,300 of supplies remaining on hand at the end of the period.

14. Recognized accrued salaries of $5,900 at the end of the accounting period.

15. Recognized $2,400 of accrued interest revenue.

1. b-1. Prepare an income statement for 2018 and 2019.

2. b-2. Prepare the statement of changes in stockholders’ equity for 2018 and 2019.

3. b-3. Prepare the balance sheet for 2018 and 2019.

4. b-4. Prepare the statement of cash flows for 2018 and 2019, using the vertical statements model.

Acc Equ 2018 Acc Equ 2019 ------- Identify each event affecting the 2018 accounting periods as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Re under the appropriate general ledger account headings of the accounting equation. (Do not round intermediate calculations. Enter any decreases 1 sign.) ALCORN SERVICE COMPANY Accounting Equation for 2018 Assets + Event Type of Event Supplies Prepaid Rent Liabilities Salaries Payable Land Accounts Pavable Accounts Cash Receivable 80,000 = Unearned Revenue Stockholders' Equity Common Retained Stock Earnings 80,000 1. AS + 5,200 5,200 + 58,000 + (58,000) (5,200) 4. I I (5,200)| + AS AE AU AS AU AE 5. 82,000 + 82,000 6. + (41,000) L L I (41,000) 58,000 (58,000) + 5,200 + 9. (5,200) (2,200) 33,600 2,200 7,400 + Totals | 33,800 24,000 0 58,000 = 0 5 ,200 0 + + 80,000

Answer 1

Event	Alcorn Service Company
Accounting Equation for 2018 (amount in $)
	assets		liabilities		stockholders equity
Type of Event	Cash	Accts. Rec	Supp	Prepd. Rent	Land		=	Accts. Pay.	Salaries Payable	Unearn. Rev.	+	Com. Stock	Ret. Earn.
1	AS	80000											80000
2	AS			5200					5200
3	AE	-58000				58000
4	AU	-5200							-5200
5	AS		82000											82000
6	AU	-41000												-41000
7	AE	58000	-58000
8	CE									5200				-5200
9	AU			-3000										-3000
totals		33800	24000	2200	0	58000			0	5200	0		80000	32800

Event	Accounting Equation for 2019 (amount in $)
	assets		liabilities		stockholders equity
Type of Event	Cash	Accts. Rec	Supp	Prepd. Rent	Land	Int. Rec.	=	Accts. Pay.	Salaries Payable	Unearn. Rev.	+	Com. Stock	Ret. Earn.
Beginning balance		33800	24000	2200	0	58000			0	5200	0		80000	32800
1	AS	40000											40000
2	AU	-5200								-5200
3	AE	-9600			9600
4	AE	58000				-58000
5	AS	10800									10800
6	AS			3000					3000
7	AS		52000											52000
8	AE	53000	-53000
9	AU	-6000												-6000
10	AU	-39500												-39500
adjustment 11	AU				-8000									-8000
adjustment 12	CE										-2700			2700
adjustment 13	AU			-2900										-2900
14	CE									5900				-5900
15	AS						2400							2400
totals		135300	23000	2300	1600	0	2400		3000	5900	8100		120000	27600
adjustment 11	9600*10/12	8000
adjustment 12	10800*3/12	2700
adjustment 13	2200+3000-2300	2900

Alcorn Service Company
Income Statement
For the years ended Dec. 31, 2018 and 2019
	2018 ($)	2019 ($)
Service revenue	82000	54700
Interest revenue	0	2400
Total revenue	82000	57100
Expenses:
operating expenses	41000	39500
supplies expenses	3000	2900
salaries expenses	5200	5900
rent expenses	0	8000
total expenses	49200	56300
net income	32800	800
Alcorn Service Company
Statement of changes in stockholders equity
For the years ended Dec. 31, 2018 and 2019
	2018 ($)	2019 ($)
Beginning Common Stock	0	80000
Plus: Stock Issued	80000	40000
Ending Common Stock	80000	120000
Beginning Retained Earnings	0	32800
Plus/Less: Net Income (Loss)	32800	800
Less: Dividends	0	-6000
Ending Retained Earnings	32800	27600
Total Stockholders’ Equity	112800	147600
Alcorn Service Company
Balance Sheet
For the years ended Dec. 31, 2018 and 2019
	2018 ($)	2019 ($)
Assets
Cash	33800	135300
Accounts Receivable	24000	23000
Interest Receivable	0	2400
Supplies	2200	2300
Prepaid Rent	0	1600
Land	58000	0
Total Assets	118000	164600
Liabilities
Accounts Payable	0	3000
Salaries Payable	5200	5900
Unearned Revenue	0	8100
Total Liabilities	5200	17000
Stockholders’ Equity
Common Stock	80000	120000
Retained Earnings	32800	27600
Total Stockholders’ Equity	112800	147600
Total Liab. and Stock. Equity	118000	164600

Alcorn Service Company
Statement of cash flows
For the years ended Dec. 31, 2018 and 2019
	2018 ($)	2019 ($)
Cash Flows From Operating Activities:
Cash Receipts from Customers	58000	63800
Cash Payments for Expense	-46200	-54300
Net Cash Flow from Operating Activities	11800	9500
Cash Flows From Investing Activities:
Cash Payment for Land	-58000	0
Cash Proceeds from Sale of Land	0	58000
Net Cash Flow From Investing Activities	-58000	58000
Cash Flows From Financing Activities:
Cash Receipts from Stock Issue	80000	40000
Cash Payment for Dividends	0	-6000
Net Cash Flow From Financing Activities	80000	34000
Net Change in Cash	33800	101500
Plus: Beginning Cash Balance	0	33800
Ending Cash Balance	33800	135300