Chapter 1, Problem 50PA

Analyze business transactions and prepare the financial statements. (LO 4). The following cash transactions took place during July 2010, the first month of business for Stay Bright Cleaning Supplies, Inc.:

1. a. Bill Lunden started a business, Stay Bright Cleaning Supplies, Inc., by contributing $7,500 cash. He received common stock in exchange.
2. b. The company earned and collected cash revenue of $2,500.
3. c. The company paid expenses of $ 1,250 in cash.
4. d. The company declared and paid dividends of $500.
5. e. On July 31, the company borrowed $4,375 from the local bank by signing a three-year note.

Requirements

1. 1. Show how each transaction affects the accounting equation.
2. 2. Prepare the income statement, statement of changes in shareholder’s equity, and statement of cash flows for the month ended July 31, 2010, and the balance sheet at July 31, 2010.