Chris Woods established an insurance agency on July 1, 2011, and completed the following transactions during July:

Question:

Chris Woods established an insurance agency on July 1, 2011, and completed the following transactions during July:
a. Opened a business bank account in the name of Woods Insurance Inc., with a deposit of $40,000 in exchange for capital stock.
b. Borrowed $30,000 by issuing a note payable.
c. Received cash from fees earned, $28,000.
d. Paid rent on office and equipment for the month, $3,000.
e. Paid automobile expense for the month, $1,800, and miscellaneous expense, $900.
f. Paid office salaries, $4,200.
g. Paid interest on the note payable, $100.
h. Purchased land as a future building site, $55,000.
i. Paid dividends, $2,000.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the integrated financial statement framework.
2. Briefly explain why the stockholders’ investments and revenues increased stockholders’ equity, while dividends and expenses decreased stockholders’ equity.
3. Prepare an income statement and retained earnings statement for July.
4. Prepare a as of July 31, 2011.
5. Prepare a statement of cash flows for July.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...