The following transactions pertain to Optimal Solutions Inc. Ass

The following transactions pertain to Optimal Solutions Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year.

2012

1. Acquired $60,000 cash from the issue of common stock.

2. Purchased a computer system for $25,000 cash. It has an estimated useful life of fi ve years and a $3,000 salvage value.

3. Paid $1,500 sales tax on the computer system.

4. Collected $35,000 in data entry fees from clients.

5. Paid $1,200 in fees to service the computers.

6. Recorded double-declining-balance depreciation on the computer system for 2012.

7. Closed the revenue and expense accounts to Retained Earnings at the end of 2013.


2013

1. Paid $800 for repairs to the computer system.

2. Bought a case of toner cartridges for the printers that are part of the computer system, $1,200.

3. Collected $38,000 in data entry fees from clients.

4. Paid $900 in fees to service the computers.

5. Recorded double-declining-balance depreciation for 2013.

6. Closed the revenue and expense accounts to Retained Earnings at the end of 2013.

2014

1. Paid $3,000 to upgrade the computer system, which extended the total life of the system to six years.

2. Paid $900 in fees to service the computers.

3. Collected $35,000 in data entry fees from clients.

4. Recorded double-declining-balance depreciation for 2014.

5. Closed the revenue and expense accounts at the end of 2014.


Required

a. Record the above transactions in a horizontal statements model like the following one.


The following transactions pertain to Optimal Solutions Inc. Ass


b. Use a vertical model to present financial statements for 2012, 2013, and2014.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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