Alcorn Service Company was formed on January 1, 2018.

Events Affecting the 2018 Accounting Period

1. Acquired $75,000 cash from the issue of common stock.

2. Purchased $4,200 of supplies on account.

3. Purchased land that cost $48,000 cash.

4. Paid $4,200 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $72,000.

6. Paid $36,000 cash for other operating expenses.

7. Collected $53,000 cash from accounts receivable.

Information for 2018 Adjusting Entries

8. Recognized accrued salaries of $4,700 on December 31, 2018.

9. Had $1,700 of supplies on hand at the end of the accounting period.

Events Affecting the 2019 Accounting Period

1. Acquired $35,000 cash from the issue of common stock.

2. Paid $4,700 cash to settle the salaries payable obligation.

3. Paid $8,100 cash in advance to lease office space.

4. Sold the land that cost $48,000 for $48,000 cash.

5. Received $9,300 cash in advance for services to be performed in the future.

6. Purchased $2,500 of supplies on account during the year.

7. Provided services on account of $47,000.

8. Collected $48,000 cash from accounts receivable.

9. Paid a cash dividend of $7,000 to the stockholders.

10. Paid other operating expenses of $34,500.

Information for 2019 Adjusting Entries

11. The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term.

12. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.

13. Had $1,800 of supplies remaining on hand at the end of the period.

14. Recognized accrued salaries of $5,400 at the end of the accounting period.

15. Recognized $1,900 of accrued interest revenue.

Problem 2-38 Part b

1. b-1. Prepare an income statement for 2018 and 2019.

2. b-2. Prepare the statement of changes in stockholders equity for 2018 and 2019.

3. b-3. Prepare the balance sheet for 2018 and 2019.

4. b-4. Prepare the statement of cash flows for 2018 and 2019, using the vertical statements model.

ALCORN SERVICE COMPANY
Income Statements
For the Years Ended December 31, 2018 and 2019
	2018	2019
Service revenue	$72,000
Interest revenue
Total revenue	72,000	0
Expenses
Operating expenses	(36,000)
Supplies expense
Salaries expense
Rent expense
Total expenses	(36,000)	0
Net income	$36,000	$0

ALCORN SERVICE COMPANY
Statement of Changes in Stockholders Equity
For the Years Ended December 31, 2018 and 2019
	2018	2019
Beginning common stock
Plus: Stock issued
Ending common stock	0	0
Beginning retained earnings
Plus: Net income
Less: Dividend
Ending retained earnings	0	0
Total stockholders equity	$0	$0

ALCORN SERVICE COMPANY
Balance Sheets
As of December 31, 2018 and 2019
	2018	2019
Assets
Cash
Accounts receivable
Supplies
Prepaid rent
Land
Interest receivable
Total assets	$0	$0
Liabilities
Accounts payable
Salaries payable
Unearned revenue
Total liabilities	0	0
Stockholders Equity
Common stock
Retained earnings
Total stockholders equity	0	0
Total liabilities and stockholders equity	$0	$0

ALCORN SERVICE COMPANY
Statements of Cash Flows
For the Years Ended December 31, 2018 and 2019
	2018	2019
Cash flows from operating activities
Cash received from customers
Cash payment for expenses
Net cash flow from operating activities	0	0
Cash flows from investing acivities
Cash payment for land
Cash proceeds from sale of land
Net cash flow from investing activities	0	0
Cash flows from financing activities
Cash receipt from stock issue
Cash payment for dividends
Net cash flow from financing activities	0	0
Net change in cash	0	0
Plus: Beginning cash balance
Ending cash balance	$0	$0