Exercise 1-26A Prepare financial statements covering two accounting cycles LO 1-5, 1-6, 1-7, 1-8, 1-9, 1-10 Ortho Company experienced the following events during its first- and second-year operations: Year 1 Transactions: Acquired $68,000 cash from the issue of common stock. Borrowed $36,000 cash from the National Credit Union. Earned $59,000 of cash revenue. Incurred $43,000 of cash expenses. Paid a $7,000 cash dividend. Paid $37,000 cash to purchase land. Year 2 Transactions: Acquired $50,000 cash from the issue of common stock. Borrowed $20,000 cash from the National Credit Union. Earned $85,000 of cash revenue. Incurred $62,000 of cash expenses. Paid a $2,000 cash dividend. Paid $25,000 cash to purchase land.

Exercise 1-26A Prepare financial statements covering two accounting cycles LO 1-5, 1-6, 1-7, 1-8, 1-9, 1-10 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. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" column may require an input- leave cells blank if there is no corresponding Retained Earnings input needed.) Answer is not complete. Assets ORTHO COMPANY Accounting Equation for Year 1 Liabilities Notes Common Payable Stock Stockholders' Equity Event Cash + Land Retained Earnings Account Titles for Retained Earnings 68,000 + + + + + + Beg. Bal. 1. Issued stock 2. Loan 3. Cash revenue 4. Cash expenses 5. Paid dividend 6. Land purchase + + + + + + 36,000 59,000 (43,000) (7,000) (37,000) $ 76,000 + + + + + + + + 37,000 $ 37,000 Totals = $ 0 + $ 0 + $ 0 + + + & Answer is not complete. Assets ORTHO COMPANY Accounting Equation for Year 2 Liabilities Notes Common = Payable Stock Event Cash + Stockholders' Equity Retained Account Titles for Earnings Retained Earnings Land Beg. Bal. 1. Issued stock 1 + + + 2. Loan + + + 3. Cash revenue + + + 4. Cash expenses + + + 5. Paid dividend + + + + + + 6. Land purchase Totals $ 0 + $ 0 = $ 0 + $ 0 + 0 + Answer is not complete. ORTHO COMPANY Income Statement For the Period Ended December 31, Year 1 & Year 2 Year 1 Year 2 $ 0 % 0 b-2. Prepare an stockholders' equity for Year 1 and Year 2. (Amounts to be dedcuted should be indicated with a minus sign.) Answer is not complete. ORTHO COMPANY Statement of Changes in Stockholders' Equity For the Period Ended December 31, Year 1 & Year 2 Year 1 Beginning common stock Year 2 0 $ Ending common stock Beginning retained earnings Ending retained earnings Total stockholders' equity $ $ $ $ 0 0 0 b-3. Prepare an balance sheet for Year 1 and Year 2. Answer is not complete. ORTHO COMPANY Balance Sheet As of December 31, Year 1 Year 1 Year 2 Assets Total assets $ Total liabilities Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity 0 0 0 0 $ $ b-4. Prepare an statement of cash flows for Year 1 and Year 2. (Amounts to be dedcuted should be indicated with a minus sign.) X Answer is not complete. ORTHO COMPANY Statement of Cash Flows For the Year Ended December 31, Year 1 & Year 2 Year 1 Cash Flows From Operating Activities: Year 2 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 $ Ending Cash Balance 0 $ 0