Question

The following transactions pertain to Accounting Solutions Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year. Year 1 1. Acquired $63,000 cash from the issue of common stock. 2. Purchased a computer system for $22,700. It has an estimated useful life of five years and a $2,810 salvage value. 3. Paid $2,000 sales tax on the computer system. 4. Collected $36,230 in fees from clients. 5. Pald $1.490 in fees for routine maintenance to service the computers. 6. Recorded double-declining balance depreciation on the computer system for Year 1. Year 2 1. Paid $670 for repairs to the computer system. 2. Bought off-site backup services to maintain the computer system. $1,220. 3. Collected $39,230 in fees from clients. 4. Paid $960 in fees to service the computers. 5. Recorded double-declining balance depreciation for Year 2. Year 3 1. Paid $3,400 to upgrade the computer system, which extended the total life of the system to six years. The salvage value did not change 2. Paid $810 in fees to service the computers. 3. Collected $32,390 In fees from clients. 4. Recorded double-declining-balance depreciation for Year 3.

Answer 1

Horizontal Statement model

Year 1
Event	Balancesheet							Income statement					Statement of cash flows
Bal	Cash	+	BV Equipment	=	Common Stick	+	Retained earnings	Revenue	-	Expense	=	Net income
1	63000				63000								63000	Financing
2	-22700		22700										-22700	investing
3	-2000		2000									0	-2000	opearting
4	36230						36230	36230				36230	36230	opearting
5	-1490						-1490			1490		-1490	-1490	opearting
6			-9880				-9880			9880		-9880
	73040		14820		63000		24860	36230		11370		24860	73040

Year 2
Event	Balancesheet							Income statement					Statement of cash flows
	Cash	+	BV Equipment	=	Common Stick	+	Retained earnings	Revenue	-	Expense	=	Net income
Bal	73040		14820		63000		24860						73040
1	-670						-670			670		-670	-670	operating
2	-1220						-1220			1220		-1220	-1220	operating
3	39230						39230	39230				39230	39230	operating
4	-960						-960			960		-960	-960	operating
5			-9880				-9880			9880		-9880
6	109420		4940		63000		51360	39230		12730		26500	109420

Year 3
Event	Balancesheet							Income statement					Statement of cash flows
	Cash	+	BV Equipment	=	Common Stick	+	Retained earnings	Revenue	-	Expense	=	Net income
Bal	109420		4940		63000		51360						109420
1	-3400		3400										-3400	investing
2	-810						-810			810		-810	-810	operating
3	32390						32390	32390				32390	32390	operating
4												0
5			-2780				-2780			2780		-2780
6	137600		5560		63000		80160	32390		3590		28800	137600

Income Statement
	Year 1	Year 2	Year 3
Sales	36230	39230	32390
Expenses
Repairs & Maintenece	1490	670
Depreciation	9880	9880	2780
Offsite backup service		1220
Service fees		960	810
Total expenses	11370	12730	3590
Net income	24860	26500	28800

Statement of changes in shareholders equity
	Year 1	Year 2	Year 3
Beginning common stock	0	63000	63000
During the year	63000	0	0
Ending common stock	63000	63000	63000
Beginning retianed earnings	0	24860	51360
Net income	24860	26500	28800
Ending retained earnings	24860	51360	80160
Total stockholders' equity	87860	114360	143160

Balancesheet
	Year 1	Year 2	Year 3
Assets
Cash	73040	109420	137600
BV eqipment	24700	14820	8340
Less: depreciation	-9880	-9880	-2780
Total assets	87860	114360	143160
Stock holder's equity
Common stock	63000	63000	63000
Retained earnings	24860	51360	80160
Total stockholders' equity	87860	114360	143160
Total liabilities+equity	87860	114360	143160

Cash Flows
	Year 1	Year 2	Year 3
Cash flow from operating activities
Net income	24860	26500	28800
Add: depreciation	9880	9880	2780
Total cash flow from operating	34740	36380	31580
Cash flow from investing
Equipment purchase	-24700	0	-3400
Total cash flow from investing	-24700	0	-3400
Cash flow from financing
Common stock	63000	0	0
Total cash flow from financing	63000	0	0
Net cahnge in cash flow	73040	36380	28180
Beginning balance	0	73040	109420
Ending	73040	109420	137600