Bubba Tea Shop was incorporated on May 1, 2005. The following transactions occurred during the month:

1. Invested $50,000 cash in the business in exchange for 2,500 shares of common stock.

2. Acquired anchor store location for $52,000, paying $32,000 in cash and signing a note with the seller for the balance.

3. Paid cash of $1,500 on June 1 for a one-year insurance policy.

4. Advertised the opening of the business, paying $1,600 cash to a local marketing firm.

5. Purchased inventory for $2,500 from supplier, payable in 30 days.

6. Sales for the month totaled $3,600 in cash and $415 on account.

7. Cost of goods sold was $1,200.

8. Paid wages of $550.

9. Paid supplier in full.

10. Rented a portion of the store to a bakery entrepreneur on May 15. The 1-year lease is for $1,500 per month, with two months rent payable in advance.

11. Collected $120 from customers with outstanding balances.

12. Paid $1,350 on the outstanding note to seller, including interest of $350.

Information for adjusting entries for June is as follows:

1. Depreciation on equipment, $575.
2. Recognize revenue from lease with bakery entrepreneur.
3. Recognize expense on insurance policy.
4. Incurred income taxes of $225, payable at the end of the calendar year.

Required:

On the following pages, show your solution to the following problems.

1. Analyze and record the above transactions.

2. Prepare the following financial statements: (i) Income Statement, (ii) Balance Sheet, and (iii) Statement of Cash Flows using both the Direct and Indirect method.