Yancy's Consulting Services experienced the following transactions for 2011, the first year of operations, and 2012. Assume that all transactions involve the receipt or payment of cash.
Transactions for 2011
1. Acquired \(\$ 50,000\) by issuing common stock.
2. Received \(\$ 100,000\) for providing services to customers.
3. Borrowed \(\$ 15,000\) cash from creditors.
4. Paid expenses amounting to \(\$ 60,000\).
5. Purchased land for \(\$ 40,000\) cash.
Transactions for 2012
Beginning account balances for 2012 are:

1. Acquired an additional \(\$ 20,000\) from the issue of common stock.
2. Received \(\$ 130,000\) for providing services in 2012.
3. Paid \(\$ 10,000\) to reduce notes payable.
4. Paid expenses amounting to \(\$ 75,000\).
5. Paid a \(\$ 15,000\) dividend to the stockholders.
6. Determined that the market value of the land is \(\$ 50,000\).
Required

a. Write an accounting equation, and record the effects of each accounting event under the appropriate headings for each year. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide appropriate titles for these accounts in the last column of the table.

b. Prepare an income statement, statement of changes in stockholders' equity, year-end balance sheet, and statement of cash flows for each year.

c. Determine the amount of cash that is in the retained earnings account at the end of 2011 and 2012.

d. Compare the information provided by the income statement with the information provided by the statement of cash flows. Point out similarities and differences.

e. Determine the balance in the Retained Earnings account immediately after Event 2 in 2011 and in 2012 are recorded.

Transcribed Image Text:

Cash Land $65,000 40,000 Notes payable 15,000 Common stock 50,000 Retained earnings 40,000