The following transactions apply to Walnut Enterprises for Year 1, its first year of operations: 1. Received $50,000 cash from the issue of a short-term note with a 6 percent interest rate and a one-year maturity. The note was made on April 1. Year 1 2. Received $130,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent 3. Paid $62,000 cash for other operating expenses during the year. 4. Paid the sales tax due on $110,000 of the service revenue for the year. Sales tax on the balance of the revenue is not due until Year 2 5. Recognized the accrued interest at December 31, Year 1 The following transactions apply to Walnut Enterprises for Year 2 1. Paid the balance of the sales tax due for Year 1 2. Received $201.000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent 3. Repaid the principal of the note and applicable interest on April 1. Year 2 4. Paid $102,500 of other operating expenses during the year 5. Paid the sales tax due on 5185,000 of the service revenue. The sales tax on the balance of the revenue is not due until Year 3. Required a. Organize the transaction data in accounts under an accounting equation b-1. Prepare an income statement for Year 1 and Year 2 b-2. Prepare a statement of changes in stockholders' equity for Year 1 and Year 2 b-3. Prepare a balance sheet for Year 1 and Year 2 b-4. Prepare a statement of cash flows for Year 1 and Year 2 Req A Req B1 Year Req B1 Year Reg B2 Year Req B2 Year Reg B3 Year Reg B3 Year Reg 84 Year Req B4 Year 2 2 Organize the transaction data in accounts under an accounting equation. (Do not round intermediate calculations. Enter an account balances with a minus sign. Leave the cell blank if there is no effect on the "Account Titles for Retained Earnings". will require entry) WALNUT ENTERPRISES Effect of Events on the General Ledger Year 1 and Year 2 Assets Liabilities Event Stockholders Equity Retained Earnings Account Titles for Retained Earnings Sales Tax Payable Cash Interest Payable Notes Payable Year 1 1 + 0 + 50,000 0 2 + 0 + 3 0 + 50,000 137.800 (62,000) (6,600) 0 119,200 7.800 0 (6,600) 0 1,200 O O OOO 0 130,000 Service revenue (62,000) Operating expenses 0 (2.250) Interest expense 65.750 + 0 + + + 0 + 2.250 2.250 + + 50.000 + 4 5 Bal Year 2 Beg bal 1. 2 2.250 S + 50,000 65,750 0 + 0 0 1.200 + (1,200) + 12,060 0 + 0 + 0 00000 SI 119,200 (1200) 213,060 0 (53,000) (102,500) (11.100) 164 460 201.000 (750) Service revenue Interest expense >> O 3b 0 30000 750 (3,000) 0 + 0 (50,000) OOO 0 Operating expenses 4 5 End bal (102,500) 0 = 0 + (11 100) + 960 0+ 0 + 0 163 500 POGBLV> Prey 1 of 1 Prepare the income statement for Year 1. (Do not round intermedi WALNUT ENTERPRISES Income Statement For the Year Ended December 31, Year 1 Service revenue $ 130,000 Expenses Operating expenses $ 62,000 0 Total Operating Expenses Operating income Interest expense 62,000 $ 122,650 X Net income $ 57,950 X
