Question

Project #1
	Complete the horizontal analysis for 2017 and 2018 for each of the transactions presented.
	Prepare the Income Statement, Statement of Changes in Stockholder's Equity, and the Balance Sheet for each year.
Record each of the following transactions in the horizontal model below. Then calculate the ending (12/31/17) balances.
1.      Sterling Cooper Advertising Agency began operations in 2017. They acquired $60,000 in cash in exchange of common stock.
2.      Performed advertising services, earning $30,000 on account and $10,000 in cash.
3.      Purchased supplies on credit $500.
4.      Paid operating expenses of $22,000.
5.      Borrowed $25,000 from the bank by signing bank note (promise to repay)
6.      Purchased land for $30,000 cash.
7.      Collected $24,000 cash from amounts previously recorded in Accounts Receivable.
8.      Supplies on hand at year end amounted to $200.

Sterling Cooper, Inc. had the following transactions during 2018. Record the transactions in the horizontal model below and calculate the (12/31/18) ending balances.
1.      Performed advertising services earning $35,000 cash and $7,000 on account.
2.      Paid operating expenses of $24,000.
3.      Received cash for advertising services yet to be performed, $5,000.
4.      On October 31th paid rent in advance for the next 6 months, $3,600.
5.      Paid $400 of A/P.
6.      Collected $10,000 in cash from amounts previously included in Accounts Receivable.
7.      At year end Sterling Cooper had earned $4,000 of the $5,000 received in transaction 3.
8.      Hint: Adjust the Prepaid Rent account

Answer 1

2Sterling Cooper Advertising Agency Horizontal Model, 2017 & 2018
	Assets					Liabilities			Stockholders Equity		Income Statement
Transaction	Cash	Accounts Receivable	Supplies	Prepaid Rent	Land	Accounts Payable	Unearned Revenue	Notes Payable	Common Stock	Retained Earnings	Revenues	Expenses	Net Income
2017
1.	60,000								60,000
2.	10,000	30,000								40,000	40,000
3.			500			500
4.	(22,000)									(22,000)		22,000
5.	25,000							25,000
6.	(30,000)				30,000
7.	24,000	(24,000)
8.			(300)							(300)		300
Ending Balances	67,000	6,000	200	0	30,000	500		25,000	60,000	17,700			17,700
2018
Beginning Balances	67,000	6,000	200	0	30,000	500	0	25,000	60,000	17,700
1.	35,000	7,000								42,000	42,000
2.	(24,000)									(24,000)		24,000
3.	5,000						5,000
4.	(3,600)			3,600
5.	(400)					(400)
6.	10,000	(10,000)
7.							(4,000)			4,000	4,000
8.				(1,200)						(1,200)		1,200
Ending balances	89,000	3,000	200	2,400	30,000	100	1,000	25,000	60,000	38,500

1.

Sterling Cooper Advertising Agency Income Statement For 2017 & 2018
	2017	2018
Advertising Revenue	$ 40,000	$ 46,000
Less: Expenses
Operating Expenses	22,000	24,000
Supplies Expense	300	0
Rent Expense	0	1,200
Total Expenses	22,300	25,200
Net Income	17,700	20,800

2.

Sterling Cooper Advertising Agency Statement of Changes in Stockholders Equity For 2017 & 2018
	2017	2018
Common Stock
Beginning balance	0	60,000
Add: Contributed during the year	60,000	0
Total	60,000	60,000
Retained Earnings
Beginning balance	0	17,700
Net income earned during the year	17,700	20,800
Total	17,700	38,500
Total Stockholders Equity	77,700	98,500

3.

Sterling Cooper Advertising Agency Balance Sheet December 31
Assets	2017	2018
Cash	67,000	89,000
Accounts Receivable	6,000	3,000
Supplies	200	200
Prepaid Rent	0	2,400
Land	30,000	30,000
Total Assets	$ 103,200	$ 124,600
Liabilities and Stockholders Equity
Accounts Payable	500	100
Unearned Revenue	0	1,000
Notes Payable	25,000	25,000
Common Stock	60,000	60,000
Retained Earnings	17,700	38,500
Total Liabilities and Stockholders' Equity	$ 103,200	$ 124,600