Alcorn Service Company was formed on January 1, 2018.

Events Affecting the 2018 Accounting Period

1. Acquired $69,000 cash from the issue of common stock.

2. Purchased $3,000 of supplies on account.

3. Purchased land that cost $36,000 cash.

4. Paid $3,000 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $60,000.

6. Paid $30,000 cash for other operating expenses.

7. Collected $47,000 cash from accounts receivable.

Information for 2018 Adjusting Entries

8. Recognized accrued salaries of $4,100 on December 31, 2018.

9. Had $1,100 of supplies on hand at the end of the accounting period.

Events Affecting the 2019 Accounting Period

1. Acquired $29,000 cash from the issue of common stock.

2. Paid $4,100 cash to settle the salaries payable obligation.

3. Paid $6,300 cash in advance to lease office space.

4. Sold the land that cost $36,000 for $36,000 cash.

5. Received $7,500 cash in advance for services to be performed in the future.

6. Purchased $1,900 of supplies on account during the year.

7. Provided services on account of $41,000.

8. Collected $42,000 cash from accounts receivable.

9. Paid a cash dividend of $8,000 to the stockholders.

10. Paid other operating expenses of $28,500.

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 $1,200 of supplies remaining on hand at the end of the period.

14. Recognized accrued salaries of $4,800 at the end of the accounting period.

15. Recognized $1,300 of accrued interest revenue.

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	$60,000	$42,875
Interest revenue		1,300
Total revenue	60,000	44,175
Expenses
Operating expenses	(30,000)	(28,500)
Supplies expense	(1,900)	(1,800)
Salaries expense	(4,100)	(4,800)
Rent expense		(5,250)
Total expenses	(36,000)	(40,350)
Net income	$24,000	$3,825

ALCORN SERVICE COMPANY
Statement of Changes in Stockholders Equity
For the Years Ended December 31, 2018 and 2019
	2018	2019
Beginning common stock	$0	$69,000
Plus: Stock issued	69,000	29,000
Ending common stock	69,000	98,000
Beginning retained earnings	$0	24,000
Plus: Net income	24,000	3,825
Less: Dividend	0	(8,000)
Ending retained earnings	24,000	19,825
Total stockholders equity	$93,000	$117,825

ALCORN SERVICE COMPANY
Balance Sheets
As of December 31, 2018 and 2019
	2018	2019
Assets
Cash	$47,000	$114,600
Accounts receivable	13,000	12,000
Supplies	1,100	1,200
Prepaid rent	0	1,050
Land	36,000	0
Interest receivable	0	1,300
Total assets	$97,100	$130,150
Liabilities
Accounts payable	$0	$1,900
Salaries payable	4,100	4,800
Unearned revenue	0	5,625
Total liabilities	4,100	12,325
Stockholders Equity
Common stock	69,000	98,000
Retained earnings	24,000	19,825
Total stockholders equity	93,000	117,825
Total liabilities and stockholders equity	$97,100	$130,150

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	$47,000	$42,000
Cash payment for expenses	(33,000)	(30,400)
Net cash flow from operating activities	14,000	11,600
Cash flows from investing acivities
Cash payment for land	(36,000)	0
Cash proceeds from sale of land	0	36,000
Net cash flow from investing activities	(36,000)	36,000
Cash flows from financing activities
Cash receipt from stock issue	69,000	29,000
Cash payment for dividends
Net cash flow from financing activities	69,000	29,000
Net change in cash	47,000	76,600
Plus: Beginning cash balance	0	47,000
Ending cash balance	$47,000	$123,600