P7-26 The following transactions apply to Artesia Co for 2012 its first year of operations.
1. Received 40,000 cash from the issue of a short term note with a five
percent interest rate and a one year maturity. The note was issued on
April 1, 2012.
2. Received 120,000 cash plus applicable sales tax from performing
services. The services are subject to a sales tax rate of six percent.
3. Paid 72,000 cash for other operating expenses during the year.
4. Paid the sales tax due on 100,000 of the services revenue for the
year. Sales tax balance on the balance of the revenue is not due until
2013.
5. Recognized the accrued interest at December 31, 2012.
The following transactions apply to Artesia Co for 2013.
1. Paid the balance of the sales tax due for 2012.
2. Received $145,000 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, 2013.
4. Paid $85,000 of other operating expenses during the year.
5. Paid the sales tax due on $120,000 of the services revenue. The
sales tax on the balance of the revenue is not due until 2014.
Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement, a statement of changes in stockholders
equity a balance sheet and a statement of cash flow for 2012 and 2013.
Click here for the solution: The following transactions apply to Artesia Co for 2012 its first year of operations
