Question

The following transactions pertain to Engineering Solutions Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year.
2013
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 to service the computers.
6. Recorded double-declining-balance depreciation on the computer system for 2013.
7. Closed the revenue and expense accounts to Retained Earnings at the end of 2013.
2014
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 2014.
6. Closed the revenue and expense accounts to Retained Earnings at the end of 2014.
2015
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 2015.
5. Closed the revenue and expense accounts at the end of 2015.

Required
a. Use a horizontal statements model like the following one to show the effect of these transactions on the elements of financial statements. Use + for increase, – for decrease, and NA for not affected. The first event is recorded as an example.


b. For each year, record the transactions in general journal form and post them to T-accounts.
c. Use a vertical model to present financial statements for 2013, 2014, and2015.


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  • CreatedOctober 26, 2013
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