The following transactions occurred during MP Public Relations Firm’s first month of business:
a. Marlene and Pamela opened up MP Public Relations Firm by contributing $22,750 on July 1, 2009, in exchange for common stock.
b. The firm borrowed $15,000 from the bank on July 1. The note is a 1-year, 10% note, with both principal and interest to be repaid on June 30, 2010.
c. The firm prepaid a year of rent for $1,200 that started August 1, 2009.
d. The firm paid $1,050 cash for operating expenses for the first month.
e. The firm earned $10,500 in revenue the first month. Of that amount, $7,500 was collected in cash.
f. The firm hired an administrative assistant and paid $525 cash in salary expense for the first month.
g. The firm declared and paid distributions to owners in the amount of $2,250 for the first month.
h. At the end of the month, $125 of interest payable is due but not yet paid on the note from item (b).
1. Show how each transaction affects the accounting equation.
2. Prepare the income statement, statement of changes in shareholders’ equity, and statement of cash flows for the month of July. Also, prepare the balance sheet at July 31.