After Nate, Maggie, Nicol, and Lindsay finished medical school, they decided to open a new medical prac-tice named New Beginnings. The graduates formed New Beginnings, Inc., as a corporation on January 1, 2011. Each graduate contributed $ 65,000 to the business in exchange for 2,500 shares of common stock. The company signed a note with Noble Bank for an additional $ 120,000. The company used available funds to purchase office space ( building) for $ 216,000. The company also purchased medical equipment on account for $ 139,000, with payment due at the beginning of the following year.
• During the first year of business, New Beginnings earned $ 280,000 in service revenue, but collected only $ 215,000; the remaining $ 65,000 was due from customers early the next year.
• Salary expenses for the year were $ 115,000, of which $ 95,000 was paid in cash during the year; the remaining $ 20,000 was due to employees the first day of the next year.
• The company purchased an insurance policy for $ 40,000 cash of which $ 5,000 was for the current year and the remainder was for future years.
• The company paid operating expenses of $ 39,000 in cash during the year.
• The company sent a check during the last month of the year for $ 8,100 for interest expense due on the loan from Noble Bank.
• The company invested $ 22,000 of cash in short- term investments at the end of the year.
• New Beginnings declared and paid cash dividends of $ 10,500 during the year.
Requirements
1. Show how each transaction affects the accounting equation.
2. Prepare the income statement, the statement of changes in shareholders' equity, and the state-ment of cash flows for the year ended December 31, 2011. Prepare the balance sheet at December 31, 2011. Ignore depreciation expense on building and equipment.
3. Calculate the current ratio at December 31, 2011.