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. Paid $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.

Required
a. Record the transactions in an accounting equation like the equation shown next. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table. Show the totals at the end of Year 1 and use these totals as the beginning balances for the second accounting cycle.

b. Prepare an income statement, a statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows for Year 1 and Year 2. Use a multi-cycle format that shows Year 1 and Year 2 information in side-by-side columns.

Transcribed Image Text:

ORTHO COMPANY Accounting Equation Acct. Titles for RE Event No. Assets + Stockholders' Equlty Llabilitles Notes Payable Common Retalned Land Stock Earnings Cash Beg. Bal. -0- -0- -0- -0- -0-