The following transactions pertain to Accounting Solutions Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year.
Year 1
1. Acquired $80,000 cash from the issue of common stock.
2. Purchased a computer system for $35,000. It has an estimated useful life of five years and a $5,000 salvage value.
3. Paid $2,450 sales tax on the computer system.
4. Collected $65,000 in fees from clients.
5. Paid $1,500 in fees for routine maintenance to service the computers.
6. Recorded double-declining-balance depreciation on the computer system for Year 1.
Year 2
1. Paid $1,000 for repairs to the computer system.
2. Bought off-site backup services to maintain the computer system, $1,500.
3. Collected $68,000 in fees from clients.
4. Paid $1,500 in fees to service the computers.
5. Recorded double-declining-balance depreciation for Year 2.
Year 3
1. Paid $6,000 to upgrade the computer system, which extended the total life of the system to six years. The salvage value did not change.
2. Paid $1,200 in fees to service the computers.
3. Collected $70,000 in fees from clients.
4. Recorded double-declining-balance depreciation for Year 3.
Required
a. Record the previous transactions in a horizontal statements model like the following one.
b. Use a vertical model to present financial statements for Year 1, Year 2, and Year 3.
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