P5—3 (Journal entries and preparing the four financial statements) Ryan Hope, controller of Hope, Inc., provides you with the following information concerning Hope during 1997. (Hope, Inc., began operations on January 1, 1997.) 1. Issued 1,000 shares of common stock at $95 per share. 2. Paid $2,600 per month to rent office and warehouse space. The rent was paid on the last day of each month. 3. Made total sales for services of $190,000: $65,000 for cash and $125,000 on account. 4. Purchased land for $32,000. 5. Borrowed $75,000 on December 31. The note payable matures in two years. 6. Salaries totaling $80,000 were paid during the year. 7. Other expenses totaling $40,000 were paid during the year. Chapter 5 The Mechanics of Financial Accounting 245 8. $56,000 was received from customers as payment on account. 9. Declared and paid a dividend of $26,000. REQUIRED:

a. Prepare journal entries for these transactions.

b. Establish T-accounts for each account, and post the journal entries to those T-accounts.

c. Prepare an income statement, statement ofretained earnings, a December 31,1997 balance sheet, and statement of cash flows for 1997.