Using Financial Reports: Analyzing Changes in Accounts and Preparing Financial Statements

Pete's Painting Service was organized as a corporation on January 20, 2011, by three individuals, each receiving 5,000 shares of stock from the new company. The following is a schedule of the cumulative account balances immediately after each of the first 10 transactions ending on January 31, 2011.

Required:
1. Analyze the changes in this schedule for each transaction; then explain the transaction. Transaction (a) is an example:
a. Cash increased $75,000, and Contributed Capital (stockholders' equity) increased $75,000. Therefore, transaction (a) was an issuance of the capital stock of the corporation for $75,000 cash.
2. Based only on the preceding schedule after transaction (j), prepare an income statement, a statement of stockholders' equity, and a balance sheet.
3. For each of the transactions, indicate the type of effect on cash flows (O for operating, I for investing, or F for financing) and the direction (+ for increase and – for decrease) and amount of the effect. If there is no effect, write none. The first transaction is provided as anexample.

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CUMULATIVE BALANCES (d) (h) (i) (b) (a) (e) (e) Accounts (g) $75,000 S70,000 $85,000 $71,000 $61,000 $64,000 $60,000 $49,000 $44,000 $60,000 26,000 Cash Accounts Receivable Office Fixtures 26,000 22,000 18,000 3,000 26,000 22,000 18,000 26,000 22,000 18,000 3,000 21,000 21,000 10,000 22,000 12,000 12,000 22,000 18,000 12,000 22,000 18,000 3,000 22,000 22,000 22,000 18,000 Land Accounts Payable Note Payable 18,000 10,000 21,000 5,000 21.000 5,000 21,000 17,000 21,000 17,000 21,000 (long-term) Contributed Capital Retained Earnings Paint Revenue Supplies Expense Wages Expense 75,000 75,000 75,000 (4,000) 44,000 5,000 75,000 75,000 (4,000) 44,000 75,000 75,000 75,000 75,000 (4,000) 44,000 75,000 (4,000) 44,000 8,000 27,000 27,000 27,000 44,000 5,000 8,000 8,000 23,000 5,000 8,000 8,000 23,000 23,000 8,000