The following events occurred during the first month of operations of a new business, which has been organized as a corporation:

a. The owners invested a total of $342,000 in exchange for 500,000 shares of common stock.

b. An additional owner invested equipment and furniture worth $225,000 in exchange for 170,000 shares of common stock. The equipment and furniture have an estimated useful life of 10 years and no salvage value.

c. The business paid $5,000 rent for the first month.

d. The business purchased land and a building with appraised values of $75,000 and $225,000, respectively, for a total purchase price of $260,000. The building is estimated to have a useful life of 30 years and no salvage value. Allocate the actual purchase amount to the two assets.

e. The business provided services to clients in exchange for $246,000 in cash and accounts receivable of $98,000.

f. Paid salaries of $72,000 for the first month.

g. Paid other operating expenses of $87,000 for the month.

Required:

1. Show how each of these events affects the business accounts. You may prepare journal entries, use the analysis format from your textbook or show in some other way which accounts are affected, and whether each account increases or decreases. You may assume that if you show a debit to a particular account, I know whether the debit means an increase or a decrease.

2. Show calculations for Net Income for this month (ignore adjusting entries for this partuse the information above) and explain why the net income amount does not equal the Cash account balance at the end of the month.

3. Based on your knowledge of business operations and on the information above, identify any adjustments that will be required to complete preparation of financial statements for this month.

Chart of Accounts for this problem: Cash, Accounts Receivable, Equipment and Furniture, Buildings, Land, Accounts Payable, Common Stock, Service Revenue, Rent Expense, Wages Expense, Operating Expenses.