Refer to E3-15.

E3-15

Lisa Frees and Amelia Ellinger have been operating a catering business for several years. In March, the partners plan to expand by opening a retail sales shop. They have decided to form the business as a corporation called Traveling Gourmet, Inc. The following transactions occurred in March:

a. Received $80,000 cash from each of the two shareholders to form the corporation, in addition to $2,000 in accounts receivable, $5,300 in equipment, a van (equipment) appraised at a fair value of $13,000, and $1,200 in supplies. Gave the two owners each 500 shares of common stock with a par value of $ 1 per share.

b. Purchased a vacant store for sale in a good location for $360,000, making a $72,000 cash down payment and signing a 10-year mortgage from a local bank for the rest.

c. Borrowed $50,000 from the local bank on a 10 percent, one-year note.

d. Purchased and used food and paper supplies costing $10,830 in March; paid cash.

e. Catered four parties in March for $4,200; $1,600 was billed, and the rest was received in cash.

f. Made and sold food at the retail store for $11,900 cash.

g. Received a $420 telephone bill for March to be paid in April.

h. Paid $363 in gas for the van in March.

i. Paid $6,280 in wages to employees who worked in March.

j. Paid a $300 dividend from the corporation to each owner.

k. Purchased $50,000 of equipment (refrigerated display cases, cabinets, tables, and chairs) and renovated and decorated the new store for $20,000 (added to the cost of the building); paid cash.

Required:

Use the balances in the completed T-accounts in E3-15 to respond to the following:

1. Prepare an income statement in good form for the month of March.

2. Identify operating (O), investing (I), and financing (F) activities affecting cash flows. Include the direction and amount of the effect. If there is no effect on cash flows, use NE.

3. What do you think about the success of this company based on the results of the first month of operations?