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 $75,000 cash from the issue of common stock 2. Purchased $4,200 of supplies on account. 3. Purchased land that cost $48,000 cash. 4. Paid $4,200 cash to settle accounts payable created in Event 2. 5. Recognized revenue on account of $72,000. 6. Paid $36,000 cash for other operating expenses. 7. Collected $53,000 cash from accounts receivable.

Answer 1

Liabilties Interest Accounts Salaries Unearned Receivable = Payable Payable Revenue + Stockholders Equity Common Retained + Stock + Earnings + 75,000 + Calculation 4,200 + + + Alcorn Service Company 2018 Assets Accounts Prepaid Events Type Cash Receivable Supplies Rent Land 1 AS 75,000 2 AS 4,200 3 | AE (48,000) 48,000 AU (4,200) 72,000 | AU (36,000) 7 AE 53,000 (53,000) 8 CE 9 AU (2,500) Totals 39,800 19,000 1,700 48,000 (4,200) + + AS + + 72,000 (36,000) Service Revenue Other operating expenses + + + + 4,700 (4,700) (2,500) -4,200-1,700 28,800 Salaries expense Supplies expense 4,700 75,000 + + + + + + + 2019 Assets Liabilties + Stockholders Equity Accounts Prepaid Interest Accounts Salaries Unearned Common Retained Events Type Cash Receivable Supplies Rent Land Receivable = Payable Payable Revenue + Stock + Earnings Calculation Bal. 39,800 19,000 1,700 48,000 4,700 + 75,000 + 28,800 AS 35,000 + 35,000 + AU (4,700) (4,700) (8,100) 8,100 48,000 (48,000) 5 AS 9,300 9,300 + 2,500 2,500 47,000 47,000 Service Revenue 48,000 (48,000) (7,000) (7,000) Dividends 10 AU (34,500) (34,500) Other operating expenses 11 AU (6,750) (6,750) =8,100/12*10 Rent expense 12 CE (2,325) + 2,325 =9,300/12*3 Service Revenue 13 AU (2,400) (2,400) =1,700+2,500-1,800 Supplies expense 14 CE 5,400 (5,400) Salaries expense 15 AS 1,900 = Interest Revenue Totals 125,800 18,000 1,800 1,350 1,900 = 2,500 5,400 6,975 + 110,000 + 23,975 AS + + + + + + + + + + + + + 1,900 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 72,000 49,325 1,900 72,000 51,225 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 36,000 4,700 2,500 34,500 5,400 2,400 6,750 49,050 2,175 43,200 28,800 2018 75,000 75,000 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 75,000 35,000 110,000 28,800 2,175 (7,000) 23,975 133,975 28,800 28,800 103,800

Alcorn Service Company Balance Sheet As of December 31, 2018 and 2019 Assets Current Assets 2018 2019 Cash 39,800 19,000 1,700 Accounts Receivable Supplies Prepaid Rent Interest Receivable Total Current Assets 125,800 18,000 1,800 1,350 1,900 148,850 60,500 Fixed Assets Land Total Assets 48,000 108,500 148,850 Liabilities & Stockholders Equity Liabilities Accounts Payable Salaries Payable Unearned Revenue Total Liabilities 4,700 2,500 5,400 6,975 14,875 4,700 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 75,000 28,800 103,800 108,500 110,000 23,975 133,975 148,850

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 48000 + 9300 -4700 +-8100 53,000 (4,200) (36,000) 12,800 57,300 (12,800) (34,500) 10,000 (48,000) Cash flows from Investing Activities Purchase of Land Proceeds from sale of land Net Cash flow from Investing Activities 48,000 48,000 (48,000) 75,000 Cash flows from Financing Activities Proceeds from issue of common stock Dividends paid Net Cash flow from Financing Activities 35,000 (7,000) 28,000 75,000 39,800 Net Change in Cash Beginning Cash Balance Ending Cash Balance 86,000 39,800 125,800 39,800