Texas Drilling Company was formed on January 1,2008.

Events Affecting the 2008 Accounting Period 1. Acquired cash of \($50,000\) from the issue of common stock.
2. Purchased \($800\) of supplies on account.
3. Purchased land that cost \($12,000\) cash.
4. Paid \($800\) cash to settle accounts payable created in Event 2.
5. Recognized revenue on account of \($38,000.
6.\) Paid \($15,000\) cash for other operating expenses.
7. Collected \($22,000\) cash from accounts receivable.

Information for 2008 Adjusting Entries 

8. Recognized accrued salaries of \($1,200\) on December 31, 2008.
9. Had \($200\) of supplies on hand at the end of the accounting period.

Events Affecting the 2009 Accounting Period 

1. Acquired an additional \($10,000\) cash from the issue of common stock.
2. Paid \($1,200\) cash to settle the salaries payable obligation.
3. Paid \($3,600\) cash in advance for a lease on office facilities.
4. Sold land that had cost \($12,000\) for \($12,000\) cash.
5. Received \($5,400\) cash in advance for services to be performed in the future.
6. Purchased \($1,000\) of supplies on account during the year.
7. Provided services on account of \($26,000\).
8. Collected \($28,000\) cash from accounts receivable.
9. Paid a cash dividend of \($5,000\) to the stockholders.

Information for 2009 Adjusting Entries 10. The advance payment for rental of the office facilities was made on March 1 for a one-year lease term.
11. The cash advance for services to be provided in the future was collected on October 1. The one-year contract started October 1.
12. Had \($150\) of supplies on hand at the end of the period.
13. Recognized accrued salaries of \($1,800\) at the end of the accounting period.

Required:

a. Identify each event affecting the 2008 and 2009 accounting periods as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Record the effects of each event under the appropriate general ledger account headings of the accounting equation.

b. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2008 and 2009, using the vertical statements model.