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Demonstration Problem 1-1 The events below apply to Computer Services Company (CSC). Assume that all transactions involve receiving or paying cash. Transactions for the year 2010: 1. CSC was started when it acquired $9,000 cash by issuing common stock. 2. The company borrowed $5,000 from a bank. 3. The company provided services to customers and received $4,000. 4. The company paid operating expenses of $2,900. 5. The company paid $500 in dividends to its stockholders. Transactions for the year 2011: 1. The company issued additional common stock for $4,500. 2. The company paid $2,000 to reduce its liabilities. 3. The company provided services to customers and received $6,700. 4. The company paid operating expenses of $4,300. 5. The company paid $700 in dividends to its stockholders. Transactions for the year 2012: 1. The company issued additional common stock for $2,500. 2. The company borrowed an additional $1,000 from creditors. 3. The company provided services to customers and received $7,400. 4. The company paid operating expenses of $7,900. 5. The company paid $300 in dividends to its stockholders. 6. The company paid $9,000 to purchase land. Required a. Record the events using the horizontal financial statements model. b. Prepare an income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for each year. 1 2 3 4 5 Assets DEMONS -EMV Computer Services Company (CSC) Effect of Transactions on the Financial Statements for 2010 Balance Sheet Income Statement Liabilities Equity Common Retained Liabilities Stock Earnings Revenue Expenses - Net Income 0 0- 0 0 0 0 = 0 Statement of Cash Flows Type of Cash Flow Flow Cash Land + + 0 + . Event 6 No. 7 Bal 8 1 9 2 10 3 11 4 12 5 13 Totals 14 - - Assets Effect of Transactions on the Financial Statements for 2011 Balance Sheet ncome Statement Liabilities Equity Common Retained - Liabilities Stock + Earnings Revenue Expenses - Net Income Statement of Cash Flows Type of Cash Flow Flow Cash - Land . 15 16 17 18 Event 19 No. 20 Bal 21 1 22 2 23 3 24 4 25 5 26 Totals 27 28 20 30 31 Event 32 No. 33 Bai 34 1 35 2 36 3 37 4 38 5 39 40 Totals 41 Assets Effect of Transactions on the Financial Statements for 2012 Balance Sheet Income Statement Liabilities Equity Common Retained Liabilities Stock Earnings Revenue Expenses - Net Income Statement of Cash Flows Type of Cash Flow Flow Cash . Land 43