The trial balance of My Motor, Inc. on March 1, 20XX, lists the entity?s assets, liabilities, and owner?s equity on that date. Balance Account Title Debit Credit Cash 26,000 Accounts receivable 4,500 Accounts payable 2,000 Common Stock 20,500 Retained earnings 8,000 Total 30,500 30,500 During March, the business engaged in the following transactions: a. Borrowed $45,000 from the bank and signed a note payable in the name of the business. b. Paid cash of $40,000 to acquire land. c. Performed service for a customer and received cash of $5,000. d. Purchased supplies on account, $300. e. Performed customer service and earned revenue on account, $2,600. f. Paid $1,200 on account. g. Paid the following cash expenses: salaries, $3,000; rent, $1,500; and interest, $400. h. Received $3,100 on account. i. Received a $200 utility bill that will be paid next week. j. Paid cash dividends of $1,800. Required: 1.) Prepare journal entries for each transaction. Key journal entries by the transaction letter. 2.) Prepare the trial balance of My Motors, Inc. at March 31, 20XX. 3.) Prepare financial statements for My Motors, Inc. for the period ending March 31, 20XX. (Balance sheet and Income statement) Note: Posting the transactions using the T-account format may be helpful, but is not required to be submitted. The attached file has the answers but I was confused as to what steps where taken to get the answers Specifically speaking on: 1) The trial balance, why is the common stock account $20,000 and the Retained Earnings account $8,500? The information given to us at the top states that the beginning balance on each account is $20,500 and $8,000 respectively. 2) On the Balance Sheet that has been completed, Why are we using net income under liabilities? I know Capital which has a balance of $28,500 is made up of Common stock and Retained Earnings, and that Notes payable is a Liability. Please explain why we are using net income in the solution.

a) b) Cash Notes payable (Borrowed cash on notes payable) 45,000 Land 40,000 45,000 Cash (Purchased land) c) d) e) f) g) h) i) j) Cash Service revenue (Performed service and received cash) Supplies Accounts payable (Purchased supplies on account) 40,000 5,000 5,000 300 300 Accounts receivable Service revenue (Performed service on account) 2,600 Accounts payable Cash (Paid on account) 1,200 Salary expense Rent expense Interest expense Cash (Paid expenses) 3,000 1,500 400 Cash Accounts receivable (received cash on account) 3,100 Utilities expense Accounts payable (Received utility bill) Dividends Cash (Paid cash dividends) 2,600 1,200 4,900 3,100 200 200 1,800 1,800 Trial Balance Account title Cash Accounts receivable Supplies Land Accounts payable Notes payable Common stock Retained earnings Cash dividends Service revenue Salary expense Rent expense Interest expense Utilities expense Debit Credit 31,200 4,000 300 40,000 1,300 45,000 20,000 8,500 1,800 7,600 3,000 1,500 400 200 82,400 82,400 Income Statement Service revenue Operatin expenses Rent expense Salary expense Interest expense Utilities expense Total operating expenses Net Income 7,600 1,500 3,000 400 200 Liabilities Capital Notes payable Net Income Balance Sheet Assets 28,500 Cash 45,000 Accounts receivable 2,500 Supplies Land 76000 5,100 2,500 31,200 4,500 300 40,000 76000