Question

Alcorn Service Company was formed on January 1, Year 1. Events Affecting the Year 1 Accounting Period 1. Acquired $79,000 cash from the issue of common stock. 2. Purchased $5,000 of supplies on account. 3. Purchased land that cost $56,000 cash. 4. Paid $5,000 cash to settle accounts payable created in Event 2. 5. Recognized revenue on account of $80,000. 6. Paid $40,000 cash for other operating expenses. 7. Collected $57,000 cash from accounts receivable. Information for Year 1 Adjusting Entries 8. Recognized accrued salaries of $5,100 on December 31, Year 1. 9. Had $2,100 of supplies on hand at the end of the accounting period. Events Affecting the Year 2 Accounting Period 1. Acquired $39,000 cash from the issue of common stock 2. Paid $5,100 cash to settle the salaries payable obligation 3. Paid $9,300 cash in advance to lease office space. 4. Sold the land that cost $56,000 for $56,000 cash. 5. Received $10,500 cash in advance for services to be performed in the future.

Answer 1

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Alcorn
Income Statement
Particulars	Year 1	Year 2
Sales Revenue	80,000.00	53,625.00
Interest Revenue	-	2,300.00
Total Revenue	80,000.00	55,925.00
Expenses
Operating Expense	40,000.00	38,500.00
Supplies Expense	2,900.00	2,800.00
Salaries Expense	5,100.00	5,800.00
Rent Expense	-	6,975.00
Total Expenses	48,000.00	54,075.00
Net Income	32,000.00	1,850.00
Statement of changes stockholder's equity	Year 1	Year 2
Beginning Common Stock	-	79,000.00
Add: Issued during the year	79,000.00	39,000.00
Ending Common Stock	79,000.00	118,000.00
Beginning Retained Earnings	-	32,000.00
Add: Net Income for the year	32,000.00	1,850.00
Less: Dividend	-	(5,000.00)
Ending Retained Earnings	32,000.00	28,850.00
Total stockholder's equity	111,000.00	146,850.00