The following transactions were entered into by Ed’s Lawn Service during 1997, its first year of operations. 1. Collected $12,000 in cash from stockholders. 2. Borrowed $5,000 from a bank. 3. Purchased two parcels of land for a total of $10,000. 4. Paid $5,000 to rent lawn equipment for the remainder of the year. 5. Provided lawn services, receiving $10,000 in cash and $4,000 in receivables. 6. Paid miscellaneous expenses of $4,000. 7. Sold one parcel of land with a cost of $3,000 for $2,800. 8. Paid a $2,200 dividend to the stockholders. REQUIRED:

a. In a manner similar to Figure 5-2, show how each transaction affected the fundamental accounting equation and prepare an income statement, statement of retained earnings, a year-end balance sheet and statement of cash flows for 1997.

b. Journalize each transaction and post it in the appropriate T-accounts. From this informa¬ tion, prepare a year-end balance sheet and an income statement, statement of retained earn¬ ings, and statement of cash flows for 1997.