The following transactions occurred during Bono Exterminators’ first month of business:
a. Joe Bono started a business, Bono Exterminators, by contributing $6,200 cash on January 1, 2010, in exchange for common stock.
b. The company borrowed $18,000 from the bank in January. The note is a 1-year, 5% note, with both principal and interest to be repaid on December 30, 2010.
c. The company paid $2,500 in cash for an insurance policy that begins February 1.
d. The company earned $4,775 in revenues during January. Cash collections of revenue amounted to $4,270 during the month.
e. The company paid operating expenses of $815 cash for the month of January.
f. The company declared and made distributions to owners in the amount of $125 cash in January.
g. At the end of January, $75 of interest payable is due on the note from item (b).
1. Show how each transaction affects the accounting equation.
2. Prepare the income statement, statement of changes in shareholder’s equity, and the statement of cash flows for the month of January and the balance sheet at January 31.