Singh Company started business on January 1, 2011. The following transactions occurred in 2011:
1. On January 1, the company issued 10,000 shares for $250,000.
2. On January 2, the company borrowed $50,000 from the bank.
3. On January 3, the company purchased land and a building for a total of $200,000 cash. The land was recently appraised at a fair market value of $60,000.
4. Inventory costing $130,000 was purchased on account.
5. Sales to customers totalled $205,000. Of these, $175,000 were sales on account.
6. The cost of the inventory that was sold to customers in transaction 5 was $120,000.
7. Payments to suppliers on account totalled $115,000.
8. Collections from customers on account totalled $155,000.
9. Payments to employees for salaries were $55,000. In addition, there was $2,000 of unpaid salaries at year end.
10. The interest on the bank loan was recognized and paid each month. The interest rate on the loan was 6%.
11. The building was estimated to have a useful life of 30 years and a residual value of $20,000. The company uses the straight-line method of depreciation.
12. The company declared dividends of $7,000 on December 15, 2011, to be paid on January 15, 2012.
Required:
a. Analyze the effects of each of the transactions on the basic accounting equation, using a table like the one in Exhibit 2-8.
b. Prepare a statement of financial position, a statement of earnings, and a statement of cash flows for 2011.