Events for two complete accounting cyclesSouthwest Plains Company was formed on January 1,...

Events for two complete accounting cycles

Southwest Plains Company was formed on January 1, 2011.

Events Affecting the 2011 Accounting Period

1. Acquired $25,000 cash from the issue of common stock.

2. Purchased $500 of supplies on account.

3. Purchased land that cost $12,000 cash.

4. Paid $500 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $9,000.

6. Paid $2,400 cash for other operating expenses.

7. Collected S7.000 cash from accounts receivable.

Information for 2011 Adjusting Entries

8. Recognized accrued salaries of $3,200 on December 31, 2011.

9. Had $100 of supplies on hand at the end of the accounting period.

Events Affecting the 2012 Accounting Period

1. Acquired $12,000 cash from the issue of common stock.

2. Paid $3,200 cash to settle the salaries payable obligation.

3. Paid $6,000 cash in advance to lease office space.

4. Sold the land that cost $12,000 for $12,000 cash.

5. Received $8,400 cash in advance for services to be performed in the future.

6. Purchased $2,000 of supplies on account during the year.

7. Provided services on account of $11,000.

8. Collected $9,000 cash from accounts receivable.

9. Paid a cash dividend of $2,000 to the stockholders.

Information for 2012 Adjusting Entries

10. The advance payment for rental of the office space (see Event 3) was made on February 1 for a.one-year term.

11. 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.

12. Had $200 of supplies remaining on hand at the end of the period.

13. Recognized accrued salaries of $6,000 at the end of the accounting period.

14. Recorded $100 of accrued interest revenue.

Required

a. Identify each event affecting the 2011 and 2012 accounting periods as an asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Record the effects of each event under the appropriate general ledger account headings of the accounting equation.

b. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2011 and 2012, using the vertical statements model.