Required information Mark's Consulting experienced the following transactions for Year 1, its first year of operations, and Year 2. Assume that all transactions involve the receipt or payment of cash. Transactions for Year 1 1. Acquired $20,000 by issuing common stock. 2. Received $35,000 for providing services to customers. 3. Borrowed $25,000 cash from creditors. 4. Paid expenses amounting to $22,000. 5. Purchased land for $30,000 cash. Transactions for Year 2 Beginning account balances for Year 2 are: Cash Land Notes payable Common stock Retained earnings $ 28,000 30,000 25,000 20,000 13,000 1. Acquired an additional $24,000 from the issue of common stock. 2. Received $95,000 for providing services in Year 2. 3. Paid $15,000 to reduce notes payable. 4. Paid expenses amounting to $71,500. 5. Paid a $3,000 dividend to the stockholders. 6. Determined that the market value of the land is $47,000. Required a. Record the effects of each accounting event under the appropriate headings for each year. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide appropriate titles for these accounts in the last column of the table. (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.) Assets MARK'S CONSULTING Accounting Equation for Year 1 Liabilities Stockholders' Equity Notes Common Retained + Payable Stock Earnings + Event Account Titles for Retained Earnings Cash + Land = + 1. + + + + + 2. 3. + = + + 4. + + + 5. + + + Totals 0 + 0 = 0 + 0 + 0 Assets MARK'S CONSULTING Accounting Equation for Year 2 Liabilities Stockholders' Equity Notes Common Retained Payable Stock Earnings + Event Account Titles for Retained Earnings Cash + Land = + + Beg. bal. + + 1. + + + 2. + + + 3. + + + 4. + + + 5. + + + 6. + + + Totals 0 + 0 = 0+ 0 + 0 b-1. Prepare an income statement for Year 1 and Year 2. MARK'S CONSULTING Income Statement For the Period Ended December 31, Year 1 & Year 2 Year 1 Year 2 $ 0 $ 0 b-2. Prepare a statement of changes in stockholders' equity for Year 1 and Year 2. MARK'S CONSULTING Statement of Changes in Stockholders' Equity For the Period Ended December 31, Year 1 & Year 2 Year 1 Year 2 Beginning common stock $ 0 $ 0 Ending common stock Beginning retained earnings $ 0 $ 0 Ending retained earnings Total stockholders' equity $ 0 $ 0 b-3. Prepare a year-end balance sheet for Year 1 and Year 2. MARK'S CONSULTING Balance Sheet December 31, Year 1 & Year 2 Year 1 Year 2 Assets $ 0 $ 0 Total assets Total liabilities Stockholders' Equity 0 Total stockholders' equity Total liabilities and stockholders' equity 0 0 $ 0 $ b-4. Prepare a statement of cash flows for Year 1 and Year 2. (Amounts to be deducted should be indicated with a minus sign.) MARK'S CONSULTING Statement of Cash Flows For the Year Ended December 31, Year 1 & 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 Ending cash balance $ 0 $ 0
