Part A Smith Company experienced the following accounting events during 2018: 1. Smith Company was started on January 1 when it issued common stock for $2,000 cash.
2. During the year, the company recognized $1,500 of consulting revenue on account.
3. The company collected $1,200 cash from accounts receivable.
4. Smith accrued salary expense during the year of $900.
5. Paid $700 of the salaries payable liability
6. Paid dividends of $100 to the stockholders.
7. Paid $360 cash for an insurance policy that covered the company for one year beginning March 1, 2018.
8. On November 1, 2018, Smith collected $2,880 cash in advance for consulting services to be provided under a one-year contract.
9. Recognized insurance expense (Policy in event 7) for ten months.
10. Recognized income earned under the one-year contract at December 31, 2018.
Part B Smith Company experienced the following accounting events during 2019
1. Smith Company issued additional common stock for $3,000 cash.
2. During the period, Smith recognized $2,700 of consulting revenue eamed on account.
3. Smith collected $2,800 cash from accounts receivable.
4. Smith accrued salary expense of $1,500.
5. The company paid $1,350 of the salaries payable liability.
6. Smith paid dividends of $300 to the stockholders.
7. Paid $420 cash to renew the insurance policy for another one-year term.
8. Smith adjusted the books to reflect the insurance expense that had been incurred in 2019 (described in event 7 of 2018).
9. Smith adjusted the books to reflect the revenue earned in 2019 under the one-year consulting contract that began in 2018 (event 8 in 2018).
Required I. 2. Record the events using the horizontal financial statements model. For 2018 and 2019, prepare an income statement, a statement of retained earnings, a balance sheet, and a statement of cash flows. Assets Liabilities Equity Event Cash Accts PrepaidSalaries UnearnedCom Retained Revenue Expese Cash Flow Activity Type Recciv Insurance Stock Earnings 2014
Beg. Bal S- 0 S- S- 0 S- S- 0 S- 0 S- 0 10 End. Bal. 2015 Beg. Bal 5 S- 0 S- 0 S. S- 0 s- 0 S- 0 End. Bal.