Question

Ortho Company experienced the following events during its first- and second-year operations: Year 1 Transactions: 1. Acquired $68,000 cash from the issue of common stock 2. Borrowed $36,000 cash from the National Credit Union. 3. Earned $59,000 of cash revenue, 4. Incurred $43,000 of cash expenses. 5. Paid a $7,000 cash dividend 6. Pald $37,000 cash to purchase land. Year 2 Transactions: 1. Acquired $50,000 cash from the issue of common stock. 2. Borrowed $20,000 cash from the National Credit Union. 3. Earned $85,000 of cash revenue. 4. Incurred $62,000 of cash expenses. 5. Paid a $2,000 cash dividend. 6. Paid $25,000 cash to purchase land,

Answer 1

Answer-

Ortho Company
Accounting Equation for Year 1
	Assets		Liabilities		Shareholder's equity
Event	Cash	+	Land	=	Notes payable	+	Common Stock	+	Retained earnings	Account tites for retained earnings
	$		$		$		$		$
Beginning balance
Issue stock	68000						68000
Loan	36000				36000
Cash revenue	59000								59000	Net profit
Cash Expense	-43000								-43000	Net profit
Cash dividend	-7000								-7000	Dividend paid
Land purchase	-37000		37000
Total	76000		37000		36000		68000		9000

Ortho Company
Accounting Equation for Year 2
	Assets		Liabilities		Shareholder's equity
Event	Cash	+	Land	=	Notes payable	+	Common Stock	+	Retained earnings	Account tites for retained earnings
	$		$		$		$		$
Beginning balance	76000		37000		36000		68000		9000
Issue stock	50000						50000
Loan	20000				20000
Cash revenue	85000								85000	Net profit
Cash Expense	-62000								-62000	Net profit
Cash dividend	-2000								-2000	Dividend paid
Land purchase	-25000		25000
Total	142000		62000		56000		118000		30000

ORTHO COMPANY
Income statement
For the year ended Decemebr 31, Year 1 & Year 2
	Year 1		Year 2
	$		$
Revenue	59000		85000
Less: Expenses	43000		62000
Net profit	16000		23000

ORTHO COMPANY
Statement of changes in Stockholder's equity
For the period ended Decemebr 31, Year 1 & Year 2
	Year 1	Year 2
	$	$
Beginning common stock	0	68000
Add: Issued during the year	68000	50000
Ending common stock	68000	118000
Beginning retained earnings	0	9000
Add: Net profit during the year	16000	23000
Less: Dividend paid	-7000	-2000
Ending retained earnings	9000	30000
Total Stockholder's equity	77000	148000

ORTHO COMPANY
Balance Sheet
For the period ended Decemebr 31, Year 1 & Year 2
	Year 1	Year 2
	$	$
Assets
Land	37000	62000
Cash	76000	142000
Total Assets	113000	204000
Liabilities
Notes payable	36000	56000
Stockholder's equity
Common stock	68000	118000
Retained earnings	9000	30000
Total Stockholder's equity	77000	148000
Total liabilities abd Stockholder's equity	113000	204000