The following transactions apply to Cheng Co. for Year 1, its first year of operations:

1. Issued $60,000 of common stock for cash.

2. Provided $94,000 of services on account.

3. Collected $84,500 cash from accounts receivable.

4. Loaned $10,000 to Swan Co. on October 1, Year 1. The note had a one year term to maturity and a 6 percent interest rate.

5. Paid $41,000 of salaries expense for the year.

6. Paid a $3,000 dividend to the stockholders.

7. Recorded the accrued interest on December 31, Year 1 (see item 4).

8. Determined that $990 of accounts receivable were uncollectible. The company uses the direct write-off method.

Required

a. Show the effects of the preceding transactions in a horizontal statements model like the one shown next.

b. Prepare the income statement, balance sheet, and statement of cash flows for Year 1.

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Balance Sheet Income Statement Statement Assets Stk. Equlty of Cash Event Accts. Notes Int. Com. Ret. Flows No. Cash + Rec. Rec. Rec. Stk. + Earn. Rev. Exp. = Net Inc.