Transaction Analysis and a Balance Sheet Krittersbegone Inc. was organized on July 1, 2010, by a group of technicians to provide termite inspections and treatment to homeowners and small businesses. The following transactions occurred during the fi rst month of business:

July 2: Received contributions of $3,000 from each of the six owners in exchange for shares of stock.

July 3: Paid $1,000 rent for the month of July.

July 5: Purchased fl ashlights, tools, spray equipment, and ladders for $18,000, with a down payment of $5,000 and the balance due in 30 days.

July 17: Paid a $200 bill for the distribution of door-to-door advertising.

July 28: Paid August rent and July utilities to the landlord in the amounts of $1,000 and $450, respectively.

July 30: Received $8,000 in cash from homeowners for services performed during the month. In addition, billed $7,500 to other customers for services performed during the month. Billings are due in 30 days.

July 30: Paid commissions of $9,500 to the technicians for July.

Required 1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Ignore depreciation expense. Use the format in Exhibit 3-1.

2. Prepare a classifi ed balance sheet dated July 31, 2010. From the balance sheet, what cash infl ow and what cash outfl ow can you predict in the month of August?

Who would be interested in the cash fl ow information? Why?

AppendixLO1