The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecker and any capital improvements occur on January 1 of each year. Year 1 Acquired $86,000 cash from the issue of common stock. Purchased a used wrecker for $48,000. It has an estimated useful life of three years and a $7,000 salvage value. Paid sales tax on the wrecker of $4,000. Collected $72,100 in towing fees. Paid $13,600 for gasoline and oil. Recorded straight-line depreciation on the wrecker for Year 1. Closed the revenue and expense accounts to Retained Earnings at the end of Year 1. Year 2 Paid for a tune-up for the wrecker’s engine, $2,500. Bought four new tires, $2,850. Collected $78,000 in towing fees. Paid $19,600 for gasoline and oil. Recorded straight-line depreciation for Year 2. Closed the revenue and expense accounts to Retained Earnings at the end of Year 2. Year 3 Paid to overhaul the wrecker’s engine, $6,400, which extended the life of the wrecker to a total of four years. The salvage value did not change. Paid for gasoline and oil, $20.700. Collected $81,000 in towing fees. Recorded straight-line depreciation for Year 3. Closed the revenue and expense accounts at the end of Year 3. c. use vertical statement model to present statements for Year 1, Year 2, and YeaR 3
The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecker and any capital improvements occur on January 1 of each year. Year 1
Acquired $86,000 cash from the issue of common stock.
Purchased a used wrecker for $48,000. It has an estimated useful life of three years and a $7,000 salvage value.
Paid sales tax on the wrecker of $4,000.
Collected $72,100 in towing fees.
Paid $13,600 for gasoline and oil. Recorded straight-line
Closed the revenue and expense accounts to
Year 2
Paid for a tune-up for the wrecker’s engine, $2,500.
Bought four new tires, $2,850. Collected $78,000 in towing fees.
Paid $19,600 for gasoline and oil.
Recorded straight-line depreciation for Year 2.
Closed the revenue and expense accounts to Retained Earnings at the end of Year 2.
Year 3
Paid to overhaul the wrecker’s engine, $6,400, which extended the life of the wrecker to a total of four years. The salvage value did not change.
Paid for gasoline and oil, $20.700.
Collected $81,000 in towing fees.
Recorded straight-line depreciation for Year 3.
Closed the revenue and expense accounts at the end of Year 3.
c. use vertical statement model to present statements for Year 1, Year 2, and YeaR 3
Vertical Statements:
Vertical statements are financial statements that an analyst can use to compare the data of one year from another or to compare the data of one company from another. A vertical statement should be prepared at the end of an accounting period.
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