(Solved): The following transactions relate to Academy Towing Service. Assume the transactions for the purcha ...

The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecke and any capital improvements occur on January 1 of each year. Yeor 1 1. Acquired \( \$ 85,000 \) cash from the issue of common stock. 2. Purchased a used wrecker for \( \$ 47,000 \) cash. It has an estimated useful life of three years and a \( \$ 11,000 \) salvage valt 3. Paid sales tax on the wrecker of \( \$ 3,000 \). 4. Collected \( \$ 71,100 \) in towing fees. 5. Paid \( \$ 13,500 \) for gasoline and oil. 6. Recorded straight-line depreciation on the wrecker for Year 1. 7. Closed the revenue and expense accounts to Retained Earnings at the end of Year 1. Year 2 1. Paid for a tune-up for the wrecker's engine, \( \$ 2,400 \). 2. Bought four new tires, \( \$ 2,750 \). 3. Collected \( \$ 77,000 \) in towing fees. 4. Paid \( \$ 19.500 \) for gasoline and oil. 5. Recorded straight-line depreciation for Year 2 6. Closed the revenue and expense accounts to Retained Eamings at the end of Year 2 Year 3 1. Paid to overhaul the wrecker's engine, \( \$ 6,300 \), which extended the life of the wrecker to a total of four years. The salvage value did not change 2. Paid for gasoline and oil, \( \$ 20.600 \). 3. Collected \( \$ 80.000 \) in towing fees. 4. Recorded straight-line depreciation for Year 3 . 5. Closed the revenue and expense accounts at the end of Year 3. ACADEMY TOWING SERVICE Financial Statements