Questions: Problem 1-7A (Algo) Analyzing transactions and preparing financial statements LO P1, P2 [The following information applies to the questions displayed below] Gabl Gram started The Gram Company, a new business that began operations on May 1. The Gram Company completed the following transactions during its first month of operations. May 1 G. Gram invested 42,000 cash in the company in exchange for its common stock. May 1 The company rented a furnished office and paid 2,500 cash for May's rent. May 3 The company purchased 1,950 of equipment on credit. May 5 The company paid 730 cash for this month's cleaning services. May 8 The company provided consulting services for a client and immediately collected 5,200 cash. May 12 The company provided 2,800 of consulting services for a client on credit. May 15 The company paid 75 cash for an assistant's salary for the first half of this month. May 22 The company provided 4,000 of consulting services on credit. May 25 The company received 4,000 cash payment for the services provided on May 22. May 26 The company paid 1,950 cash for the equipment purchased on May 3. May 27 The company purchased 85 of equipment on credit. May 28 The company paid 750 cash for an assistant's salary for the second half of this month. May 30 The company paid 350 cash for this month's telephone bill. May 30 The company paid 27 cash for this month's utilities. May 31 The company paid 1,500 cash in dividends to the owner (sole shareholder).

To analyze the transactions and prepare the financial statements, we need to record each transaction in the accounting equation format. The accounting equation is:

\[ \text{Assets} = \text{Liabilities} + \text{Equity} \]

We will break down each transaction and record its impact on the accounting equation. Here is the detailed breakdown:

1. May 1: G. Gram invested $42,000 cash in the company in exchange for its common stock.

   • Assets (Cash): +$42,000
   • Equity (Common Stock): +$42,000

2. May 1: The company rented a furnished office and paid $2,500 cash for May's rent.

   • Assets (Cash): -$2,500
   • Equity (Expenses - Rent Expense): -$2,500

3. May 3: The company purchased $1,950 of equipment on credit.

   • Assets (Equipment): +$1,950
   • Liabilities (Accounts Payable): +$1,950

4. May 5: The company paid $730 cash for this month's cleaning services.

   • Assets (Cash): -$730
   • Equity (Expenses - Cleaning Expense): -$730

5. May 8: The company provided consulting services for a client and immediately collected $5,200 cash.

   • Assets (Cash): +$5,200
   • Equity (Revenues - Consulting Revenue): +$5,200

6. May 12: The company provided $2,800 of consulting services for a client on credit.

   • Assets (Accounts Receivable): +$2,800
   • Equity (Revenues - Consulting Revenue): +$2,800

7. May 15: The company paid $750 cash for an assistant's salary for the first half of this month.

   • Assets (Cash): -$750
   • Equity (Expenses - Salary Expense): -$750

8. May 22: The company provided $4,000 of consulting services on credit.

   • Assets (Accounts Receivable): +$4,000
   • Equity (Revenues - Consulting Revenue): +$4,000

9. May 25: The company received $4,000 cash payment for the services provided on May 22.

   • Assets (Cash): +$4,000
   • Assets (Accounts Receivable): -$4,000

10. May 26: The company paid $1,950 cash for the equipment purchased on May 3.

    • Assets (Cash): -$1,950
    • Liabilities (Accounts Payable): -$1,950

11. May 27: The company purchased $85 of equipment on credit.

    • Assets (Equipment): +$85
    • Liabilities (Accounts Payable): +$85

12. May 28: The company paid $750 cash for an assistant's salary for the second half of this month.

    • Assets (Cash): -$750
    • Equity (Expenses - Salary Expense): -$750

13. May 30: The company paid $350 cash for this month's telephone bill.

    • Assets (Cash): -$350
    • Equity (Expenses - Telephone Expense): -$350

14. May 30: The company paid $27 cash for this month's utilities.

    • Assets (Cash): -$27
    • Equity (Expenses - Utilities Expense): -$27

15. May 31: The company paid $1,500 cash in dividends to the owner (sole shareholder).

    • Assets (Cash): -$1,500
    • Equity (Dividends): -$1,500

Here is the summarized accounting equation for each transaction:

\[ \begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline \text{Date} & \text{Cash} & + & \text{Accounts Receivable} & + & \text{Equipment} & = & \text{Liabilities} & + & \text{Common Stock} & - & \text{Dividends} & + & \text{Revenues} & - & \text{Expenses} & \text{Account Titles for Expenses} \\ \hline \text{May 1} & \$42,000 & + & & + & & = & & + & \$42,000 & - & & + & & - & & \\ \hline \text{May 1} & -\$2,500 & + & & + & & = & & + & & - & & + & & - & \$2,500 & \text{Rent Expense} \\ \hline \text{May 3} & & + & & + & \$1,950 & = & + & \$1,950 & & - & & + & & - & & \\ \hline \text{May 5} & -\$730 & + & & + & & = & & + & & - & & + & & - & \$730 & \text{Cleaning Expense} \\ \hline \text{May 8} & \$5,200 & + & & + & & = & & + & & - & & + & \$5,200 & - & & \\ \hline \text{May 12} & & + & \$2,800 & + & & = & & + & & - & & + & \$2,800 & - & & \\ \hline \text{May 15} & -\$750 & + & & + & & = & & + & & - & & + & & - & \$750 & \text{Salary Expense} \\ \hline \text{May 22} & & + & \$4,000 & + & & = & & + & & - & & + & \$4,000 & - & & \\ \hline \text{May 25} & \$4,000 & + & -\$4,000 & + & & = & & + & & - & & + & & - & & \\ \hline \text{May 26} & -\$1,950 & + & & + & & = & -\$1,950 & + & & - & & + & & - & & \\ \hline \text{May 27} & & + & & + & \$85 & = & + & \$85 & & - & & + & & - & & \\ \hline \text{May 28} & -\$750 & + & & + & & = & & + & & - & & + & & - & \$750 & \text{Salary Expense} \\ \hline \text{May 30} & -\$350 & + & & + & & = & & + & & - & & + & & - & \$350 & \text{Telephone Expense} \\ \hline \text{May 30} & -\$27 & + & & + & & = & & + & & - & & + & & - & \$27 & \text{Utilities Expense} \\ \hline \text{May 31} & -\$1,500 & + & & + & & = & & + & & - & \$1,500 & + & & - & & \\ \hline \end{array} \]

This table summarizes the impact of each transaction on the accounting equation, showing changes in assets, liabilities, and equity.