Iowa Service Company was formed on January 1, Year 1. Events Affecting the Year 1 Accounting Period

Question:

Iowa Service Company was formed on January 1, Year 1. Events Affecting the Year 1 Accounting Period
1. Acquired cash of $60,000 from the issue of common stock.
2. Purchased $1,200 of supplies on account.
3. Purchased land that cost $18,000 cash.
4. Paid $800 cash to settle accounts payable created in Event 2.
5. Recognized revenue on account of $42,000.
6. Paid $21,000 cash for other operating expenses.
7. Collected $38,000 cash from accounts receivable.

Information for Year 1 Adjusting Entries
8. Recognized accrued salaries of $3,200 on December 31, Year 1.
9. Had $200 of supplies on hand at the end of the accounting period.

Events Affecting the Year 2 Accounting Period
1. Acquired an additional $20,000 cash from the issue of common stock.
2. Paid $3,200 cash to settle the salaries payable obligation.
3. Paid $3,600 cash in advance for a lease on office facilities.
4. Sold land that had cost $15,000 for $15,000 cash.
5. Received $4,800 cash in advance for services to be performed in the future.
6. Purchased $1,000 of supplies on account during the year.
7. Provided services on account of $32,000.
8. Collected $33,000 cash from accounts receivable.
9. Paid a cash dividend of $5,000 to the stockholders.
10. Paid other operating expenses of $19,500.

Information for Year 2 Adjusting Entries
11. The advance payment for rental of the office facilities (see Event 3) was made on March 1 for a one-year lease term.
12. The cash advance for services to be provided in the future was collected on October 1. The one-year contract started October 1.
13. Had $300 of supplies on hand at the end of the period.
14. Recognized accrued salaries of $3,900 at the end of the accounting period.

Required
a. Identify each event affecting the Year 1 and Year 2 accounting periods as 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 Year 1 and Year 2.

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

Fantastic news! We've Found the answer you've been seeking!