You are given the following transactions:
1. Megan Moore’s Aunt Myrtle May willed her an old bakery shop. Megan decided
to open a pastry shop, Sugar & Spice, by contributing $7,500 on May 1, 2002.
2. The Sugar & Spice Pastry Shop borrowed $6,000 from the bank on May 1. The
note is a 1- year, 10% note, with both principal and interest to be repaid on April
30, 2003.
3. Megan paid $2,000 to rent equipment for the shop for the month.
4. The electricity and water bills for the month were $850, paid in cash.
5. The Sugar & Spice pastry shop was a hit and earned $5,500 in revenue the first
month, all in cash.
6. Since Sunny Susan’s Tanning Salon closed, Megan hired her friend to be the
customer service specialist for the pastry shop. The salary expense was $425, paid
for one month.
7. Learning little from her friend Sunny Susan’s business failure, Megan withdrew
$560 for a shopping spree to celebrate her business’s early success.
Required:
1. Show how each transaction affects the accounting equation.
2. Give one additional piece of information related to the transaction that could be
recorded in an information system for a purpose other than the financial
statements.
3. Prepare the four basic financial statements for the month of May.