Alcorn Service Company was formed on January 1, Year 1. Events Affecting the Year 1 Accounting Period 1. Acquired $64,000 cash from the issue of common stock. 2. Purchased $2,000 of supplies on account. 3. Purchased land that cost $26,000 cash. 4. Paid $2,000 cash to settle accounts payable created in Event 2. 5. Recognized revenue on account of $50,000. 6. Paid $25,000 cash for other operating expenses. 7. Collected $42,000 cash from accounts receivable. Information for Year 1 Adjusting Entries 8. Recognized accrued salaries of $3,600 on December 31, Year 1. 9. Had $600 of supplies on hand at the end of the accounting period. Events Affecting the Year 2 Accounting Period 1. Acquired $24,000 cash from the issue of common stock. 2. Paid $3,600 cash to settle the salaries payable obligation. 3. Paid $4,800 cash in advance to lease office space. 4. Sold the land that cost $26,000 for $26,000 cash. Events Affecting the Year 2 Accounting Period 1. Acquired $24,000 cash from the issue of common stock 2. Paid $3,600 cash to settle the salaries payable obligation 3. Paid $4,800 cash in advance to lease office space. 4. Sold the land that cost $26,000 for $26,000 cash 5. Received $6,000 cash in advance for services to be performed in the future. 6. Purchased $1,400 of supplies on account during the year. 7. Provided services on account of $36.000 8. Collected $37,000 cash from accounts receivable, 9. Paid a cash dividend of $9,000 to the stockholders 10. Pald other operating expenses of $23.500 Information for Year 2 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 $700 of supplies remaining on hand at the end of the period. 14. Recognized accrued salaries of $4,300 at the end of the accounting period. 15. Recognized $800 of accrued interest revenue, ALCORN SERVICE COMPANY Income Statements For the Years Ended December 31, Year 1 and Tear 2 Year 1 Year 2 Service revenue $ 50,000 $ 36,000 Interest revenue 0 0 800 $ 50,000 36,800 25,000 23,500 Total revenue Expenses Operating expenses Supplies expense Salaries expense Rent expense Total expenses 25,000 25,000 23,500 13,300 $ $ ALCORN SERVICE COMPANY Statement of Changes in Stockholders' Equity For the Years Ended December 31, Year 1 and Year 2 Year 1 Year 2 Beginning common stock Plus: Stock issued Ending common stock Beginning retained earnings Plus: Net income $ 0 $ 64,000 64,000 24,000 64,000 88,000 $ 64,000 88,420 0 79,200 79,200 (9,000) (15,200) 158,200 $ 48,800 $ 246,200 Less: Dividend Ending retained earnings Total stockholders' equity ALCORN SERVICE COMPANY Balance Sheets As of December 31, Year 1 and Year 2 Year 1 Year 2 Assets Cash Accounts receivable + Supplies Interest receivable Total assets Liabilities $ 0 $ 0 Total assets $ 0 $ 0 Liabilities Total liabilities 0 0 Stockholders' Equity 0 0 Total stockholders' equity Total liabilities and stockholders' equity $ 0 $ 0 For the Years Ended December 31, Year 1 and Year 2 Year 1 Year 2 Cash flows from operating activities 0 0 Net cash flow from operating activities Cash flows from investing activities 0 0 Net cash flow from investing activities Cash flows from financing activities Net cash flow from financing activities 0 0 0 0 Net cash flow from investing activities Cash flows from financing activities 0 0 Net cash flow from financing activities Net change in cash 0 0 Ending cash balance $ 0 $ 0
