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 $185,000 of the service revenue. The sales tax on the balance of the revenue is not due until Year 3.

Required

1. a. Organize the transaction data in accounts under an accounting equation.
2. b-1. Prepare an income statement for Year 1 and Year 2.
3. b-2. Prepare a statement of changes in stockholders equity for Year 1 and Year 2.
4. b-3. Prepare a balance sheet for Year 1 and Year 2.
5. b-4. Prepare a statement of cash flows for Year 1 and Year 2.

Organize the transaction data in accounts under an accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign. Leave the cell blank if there is no effect on the "Account Titles for Retained Earnings". Not all cells 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 Cash Sales Tax Payable Interest Payable Notes Payable + Year 1 1. = + + . + + 2. + + 3. + + + 4. + + + 5. + + + Bal. + + + Year 2 Beg. bal. + . 1. IIIIII +++ + + + + + +++ 2. . 3b. 4. + 5. +++ + + + +++ + + End. bal. + Prepare the income statement for Year 1. (Do not round intermediate calculations.) WALNUT ENTERPRISES Income Statement For the Year Ended December 31, Year 1 Expenses Total Operating Expenses WALNUT ENTERPRISES Income Statement For the Year Ended December 31, Year 2 Expenses Total Operating Expenses Prepare the statement of changes in stockholders' equity for Year 1. WALNUT ENTERPRISES Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 1 Ending retained earnings Total stockholders' equity WALNUT ENTERPRISES Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 Ending retained earnings Total stockholders' equity Prepare the balance sheet for Year 1. WALNUT ENTERPRISES Balance Sheet As of December 31, Year 1 Assets Total assets Liabilities Total liabilities Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity WALNUT ENTERPRISES Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Total liabilities Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity Prepare the statement of cash flows for Year 1. (Cash outflows should be indicated with a minus sign.) WALNUT ENTERPRISES Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net cash flows from financing activities Net change in cash Ending cash balance WALNUT ENTERPRISES Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities Net cash flow from operating activities Net cash flow from investing activities Cash flows from financing activities Net cash flow from financing activities Net change in cash Ending cash balance