PRACTICE CASE Analyzing transactions and preparing financial statements (LG 3-6) Falmouth Cycle Rental, Inc. opened in June, 2011. During the first month of operations the following events took place: 2011 2Owners invested $60,000 cash in Famouth Cycle Rental and received shares of common stock. 5 Jun. Purchased 25 bicycles to be rented to customers at a total cost of $7,500. Made a down payment of $2,000 in cash and signed a six-month note payable for the $5,500 remaining balance. Paid $1,000 rent on a store for June in cash. 7 Purchased $500 in bicycle repair supplies on account and promised to pay before the end of the month. 11 Paid a local printer $200 cash for advertising fliyers, which were distributed to motels and stores in the area. 16 Rented 10 bicycles to a local convention organizer who promised to pay $1.200 in a week. 20 Rented bicycles to a vacationing family for $600 cash. 23 Received $800 in cash from the convention organizer who had rented the bicycles on June 16. Paid $400 cash on account for the supplies purchased on June 8. Paid a part-time worker $800 for June. 26 30 REQUIRED 1. At the top of columnar paper write out the accounting equation. Set up columns on a work sheet similar to that in Exhibit 1.3 and enter the following items making sure to enter them under the proper accounting equation element: cash, accounts receivable, repair supplies, bicycles, accounts payable, notes payable (short-term), common stock, and retained earnings. 2. Analyze each of the events using the accounting equation and enter those that affect the business in the proper columns (as in Exhibit 1.3). Prepare the following financial statements: a. Income statement for the month ended June 30, 2011. 3. b. Statement of owners' equity for the month ended June 30, 2011. c. Balance sheet as of June 30, 201.1. d. Statement of cash flows for the month ended June 30, 2011