Singh Company started business on January 1, 2016. The following transactions occurred in 2016:

1. On January 1, the company issued 10,000 common shares for $250,000.

2. On January 2, the company borrowed $50,000 from the bank.

3. On January 3, the company purchased land and a building for a total of $200,000 cash. The land was recently appraised at a fair market value of $60,000.

4. Inventory costing $130,000 was purchased on account.

5. Sales to customers totalled $205,000. Of these, $175,000 were sales on account.

6. The cost of the inventory that was sold to customers in transaction 5 was $120,000.

7. Payments to suppliers on account totalled $115,000.

8. Collections from customers on account totalled $155,000.

9. Payments to employees for wages were $55,000. In addition, there was $2,000 of unpaid wages at year end.

10. The interest on the bank loan was recognized and paid for the year. The interest rate on the loan was 6%.

11. The building was estimated to have a useful life of 30 years and a residual value of $20,000. The company uses the straight-line method of depreciation.

12. The company declared dividends of $7,000 on December 15, 2016, to be paid on January 15, 2017.

Required:

a. Analyze the effects of each of the transactions on the basic accounting equation, using a table like the one in Exhibit 2-3.

In Exhibit 2-3

b. Prepare a statement of income, a statement of changes in equity, a statement of financial position (unclassified), and a statement of cash flows for 2016.

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ASSETS LIABILITIES S/H EQUITY Bank Prepaid Interest Loan Common Retained R/E/ A/P Payable Payable Shares Earnings DD Date Cash A/R Inv. Ins. Equip. Land Jan. 250,000 Jan. 1 100,000 Jan 1 1,100) Jan. 1 (65,000) Jan 1 (1,800) Jan. 6 (180,000 250,000 100,000 (1,100) E 65,000 1,800 180,000 Jan. 10 Jan. 12: 1 21,000 13,000 Jan. 12: 2 23,000 23,000 34,000R (17,000) E (17,000) Jan. 2011,000 (11,000) Jan. 22 13,500) Jan. 25 (1,900) Jan. 26(2,200) Jan. 28 (2,900) Jan. 31 (400) Jan. 31 Jan. 31 Jan. 31 (13,500) (1,900E (2,200)E (2,900)E (400) DD (850)E (150) E (500) E (850) (150) 500 113,200 2,000 6,000 ,650 64,150 180,000 9 9,500500 100,000 250,000 7,000 367,000 367,000