Southwest Plains Company was formed on January 1, 2011.

Events Affecting the 2011 Accounting Period

1. Acquired \(\$ 25,000\) cash from the issue of common stock.

2. Purchased \(\$ 500\) of supplies on account.

3. Purchased land that cost \(\$ 12,000\) cash.

4. Paid \(\$ 500\) cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of \(\$ 9,000\).

6. Paid \(\$ 2,400\) cash for other operating expenses.

7. Collected \(\$ 7,000\) cash from accounts receivable.

Information for 2011 Adjusting Entries

8. Recognized accrued salaries of \(\$ 3,200\) on December 31, 2011.

9. Had \(\$ 100\) of supplies on hand at the end of the accounting period.

Events Affecting the 2012 Accounting Period

1. Acquired \(\$ 12,000\) cash from the issue of common stock.

2. Paid \(\$ 3,200\) cash to settle the salaries payable obligation.

3. Paid \(\$ 6,000\) cash in advance to lease office space.

4. Sold the land that cost \(\$ 12,000\) for \(\$ 12,000\) cash.

5. Received \(\$ 8,400\) cash in advance for services to be performed in the future.

6. Purchased \(\$ 2,000\) of supplies on account during the year.

7. Provided services on account of \(\$ 11,000\).

8. Collected \(\$ 9,000\) cash from accounts receivable.

9. Paid a cash dividend of \(\$ 2,000\) to the stockholders.

Information for 2012 Adjusting Entries 10. The advance payment for rental of the office space (see Event 3) was made on February 1 for a one-year term.

11. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.

12. Had \(\$ 200\) of supplies remaining on hand at the end of the period.

13. Recognized accrued salaries of \(\$ 6,000\) at the end of the accounting period.

14. Recorded \(\$ 100\) of accrued interest revenue.

Required

a. Identify each event affecting the 2011 and 2012 accounting periods as an 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 2011 and 2012, using the vertical statements model.