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Roger Smith established an insurance agency on July 1, 20Y5, and completed the following transactions during July. Opened a business bank account in the name
Roger Smith established an insurance agency on July 1, 20Y5, and completed the following transactions during July.
- Opened a business bank account in the name of Smith Insurance Inc., with a deposit of
$30,000 in exchange for common stock.
- Borrowed $50,000 by issuing a note payable.
- Received cash from fees earned, $15,000.
- Paid rent on office and equipment for the month, $2,500.
- Paid automobile expense for the month, $1,250, and miscellaneous expense, $5000.
- Paid office salaries, $3,250.
- Paid interest on the note payable, $250.
- Purchased land as a future building site, paying cash of $60,000.
- Paid dividends, $1,500.
- Indicate the effect of each transaction and the balances after each transaction, using the integrated financial statement framework. After all transactions are recorded, enter Net in- come under the Income Statement column.
- Briefly explain why the stockholders' investments and revenues increased stockholders' equity, while dividends and expenses decreased stockholders' equity.
- Prepare an income statement and statement of stockholders' equity for July.
- Prepare a balance sheet as of July 31, 20Y5.
Prepare a statement of cash flows for July.
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