The cash advance for services to be provided in the future


Alabama Service Company was formed on January 1, 2013. 

Events Affecting the 2013 Accounting Period: 

1. Acquired cash of $60,000 from the issue of common stock. 
2. Purchased $1,200 of supplies on account. 
3. Purchased land that cost $18,000 cash. 
4. Paid $800 cash to settle accounts payable created in Event 2. 
5. Recognized revenue on account of $42,000. 
6. Paid $21,000 cash for other operating expenses. 
7. Collected $38,000 cash from accounts receivable. Information for 2013 Adjusting Entries: 
8. Recognized accrued salaries of $3,200 on December 31, 2013. 
9. Had $200 of supplies on hand at the end of the accounting period. 

Events Affecting the 2014 Accounting Period: 

1. Acquired an additional $20,000 cash from the issue of common stock. 
2. Paid $3,200 cash to settle the salaries payable obligation. 
3. Paid $3,600 cash in advance for a lease on office facilities. 
4. Sold land that had cost $15,000 for $15,000 cash. 
5. Received $4,800 cash in advance for services to be performed in the future.
6. Purchased $1,000 of supplies on account during the year. 
7. Provided services on account of $32,000. 
8. Collected $33,000 cash from accounts receivable. 
9. Paid a cash dividend of $5,000 to the stockholders. 
10. Paid other operating expenses of $19,500.

Information for 2014 Adjusting Entries: 

11. The advance payment for rental of the office facilities (see Event 3) was made on March 1 for a one year lease term. 
12. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one year contract started October 1. 
13. Had $300 of supplies on hand at the end of the period. 
14. Recognized accrued salaries of $3,900 at the end of the accounting period. 
15. Recognized $400 of accrued interest revenue.

Required: 

a. Identify each event affecting the 2013 and 2014 accounting periods as 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 2013 and 2014, using the vertical statements model.

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Accounting Basics: The cash advance for services to be provided in the future
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