The following transactions are entered into by Sparkle Car Wash during its first month of operations:
a. Articles of incorporation are filed with the state, and 20,000 shares of capital stock are issued. Cash of $40,000 is received from the new owners for the shares.
b. A five-year promissory note is signed at the local bank. The cash received from the loan is $120,000.
c. An existing car wash is purchased for $150,000 in cash. The values assigned to the land, building, and equipment are $25,000, $75,000, and $50,000, respectively.
d. Cleaning supplies are purchased on account for $2,500 from a distributor. None of the supplies are used in the first month.
e. During the first month, $1,500 is paid to the distributor for the cleaning supplies. The remaining $1,000 will be paid next month.
f. Gross receipts from car washes during the first month of operations amount to $7,000.
g. Wages and salaries paid in the first month amount to $2,000.
h. The utility bill of $800 for the month is paid.
i. A total of $1,000 in dividends is paid to the owners.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction by letter.
2. Prepare an income statement for the month.
3. Prepare a balance sheet at the end of the month.