Required information [The following information applies to the questions displayed below.] The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecker and any capital improvements occur on January 1 of each year. Year 1 1. Acquired $73,000 cash from the issue of common stock. 2. Purchased a used wrecker for $35,000. It has an estimated useful life of three years and a $6,000 salvage value. 3. Paid sales tax on the wrecker of $4,000. 4. Collected $59,100 in towing fees. 5. Paid $12,300 for gasoline and oil. 6. Recorded straight-line depreciation on the wrecker for Year 1. 7. Closed the revenue and expense accounts to Retained Earnings at the end of Year 1. Year 2 1. Paid for a tune-up for the wrecker's engine, $1,200. 2. Bought four new tires, $1,550. 3. Collected $65,000 in towing fees. 4. Paid $18,300 for gasoline and oil. 5. Recorded straight-line depreciation for Year 2. 6. Closed the revenue and expense accounts to Retained Earnings at the end of Year 2. Year 3 1. Paid to overhaul the wrecker's engine, $5,100, which extended the life of the wrecker to a total of four years. The salvage value did not change. 2. Paid for gasoline and oil, $19,400. 3. Collected $68,000 in towing fees. 4. Recorded straight-line depreciation for Year 3. 5. Closed the revenue and expense accounts at the end of Year 3. b. Use a vertical model to present financial statements for Year 1, Year 2, and Year 3. (Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign.) Year 3 ACADEMY TOWING SERVICE Income Statements For the Year Ended December 31 Year 1 Year 2 Service revenue Expenses Maintenance expense Gas & oil expense Depreciation expense Total expense ACADEMY TOWING SERVICE Statement of Changes in Stockholders' Equity For the Year Ended December 31 Year 1 Year 2 Year 3