Beth Sumner established an insurance agency on April 1, 2004, and completed the following transactions during April:

a. Opened a business bank account in the name of Sumner Insurance Inc. with a deposit of $15,000 in exchange for capital stock.

b. Borrowed $8,000 by issuing a note payable.

c. Received cash from fees earned, $11,500.

d. Paid rent on office and equipment for the month, $3,500.

e. Paid automobile expenses for month, $650, and miscellaneous expenses, $300.

f. Paid office salaries, $1,400.

g. Paid interest on the note payable, $60.

h. Purchased land as a future building site, $20,000.

i. Paid dividends, $1,000.

Instructions

1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

Explain the nature of each increase and decrease in stockholders’ equity by an appropriate notation at the right of the amount.

2. Prepare an income statement and retained earnings statement for April.

3. Prepare a balance sheet as of April 30, 2004.

4. Prepare a statement of cash flows for April.