The following transactions apply to Sports Consulting for Year 1, the first year of operation:
1. Issued $5,000 of common stock for cash.
2. Recognized $70,000 of service revenue earned on account.
3. Collected $62,000 from accounts receivable.
4. Adjusted accounts to recognize uncollectible accounts expense. Sports uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 2 percent of sales on account.

The following transactions apply to Sports Consulting for Year 2:
1. Recognized $84,000 of service revenue on account.
2. Collected $70,000 from accounts receivable.
3. Determined that $1,100 of the accounts receivable were uncollectible and wrote them off.
4. Collected $200 of an account that had been previously written off.
5. Paid $51,200 cash for operating expenses.
6. Adjusted accounts to recognize uncollectible accounts expense for Year 2. Sports estimates that uncollectible accounts expense will be 1 percent of sales on account.

Required
Complete all the following requirements for Year 1 and Year 2. Complete all requirements for Year 1 prior to beginning the requirements for Year 2.
a. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange).
b. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown next. Use + for increase, − for decrease, and NA for not affected. Also, in the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example.

c. Organize the transaction data in accounts under an accounting equation.
d. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows.

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Income Statement Balance Sheet Statement of Cash Flows Event Rev. - Exp. = Llab. + Stk. Equity Net Inc. Assets No. NA 1. NA NA