Recording events in a statements model and T-accounts and preparing a trial balanceThe fol...

Recording events in a statements model and T-accounts and preparing a trial balance

The following accounting events apply to Parks Co. for the year 2011:

Asset Source Transactions

1.    Began operations when the business acquired $20,000 cash from the issue of common stock.

2.    Performed services and collected cash of $1,000.

3.    Collected $4,500 of cash in advance for services to be provided over the next 12 months.

4.    Provided $12,000 of services on account.

5.    Purchased supplies of $420 on account.

Asset Exchange Transactions

6.    Purchased $4,000 of land for cash.

7.    Collected $8,500 of cash from accounts receivable.

8.    Purchased $500 of supplies with cash.

9.    Paid $3,600 in advance for one year’s rent.

Asset Use Transactions

10.     Paid $3,000 cash for salaries of employees.

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

12.     Paid $420 for supplies that had been purchased on account.

Claims Exchange Transactions

13.     Placed an advertisement in the local newspaper for $150 and agreed to pay for the ad later.

14.     Incurred utilities expense of $125 on account.

Adjusting Entries

15.     Recognized $3,000 of revenue for performing services. The collection of cash for these services occurred in a prior transaction. (See Event 3.)

16.     Recorded $900 of accrued salary expense at the end of 2011.

17.     Recorded supplies expense. Had $120 of supplies on hand at the end of the accounting period.

18.     Recognized that three months of prepaid rent had been used up during the accounting period.

19.     Recognized $450 of accrued interest revenue.

Required

a.    Record each of the preceding transactions in T-accounts and determine the balance of each account.

b.   Prepare a before-closing trial balance.

c.     Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (+), decreases (−), or does not affect (NA) each element of the financial statements. Also, in the Cash Flow column, use the letters OA to designate operating activity, IA for investing activity, and FA for financing activity. The first event is recorded as an example.