Lee Delivery Company Inc. (LDC) was incorporated in 2017. The following transactions occurred during the year: a.

Question:

Lee Delivery Company Inc. (LDC) was incorporated in 2017. The following transactions occurred during the year: 

a. Received $40,000 cash from organizers in exchange for shares in the new company

b. Purchased land for $12,000, signing a two-year note (Ignore interest) 

c. Bought two used delivery trucks at the start of the year at a cost of $10,000 each; paid $2,000 cash and signed a note due in three years for the rest (Ignore interest.) 

d. Paid $2,000 cash to a truck repair shop for a new motor, which increased the cost of one of the trucks e. Shareholder Jonah Lee paid $122,000 cash for a house for his personal use 


Required: 

1. Analyze each item for its effects on the accounting equation of LDC, for the year ended December 31, 2017. 

Assets Liabilities Shareholders' Equity (a) Cash +40,000 Contributed Capital +40,000


2. Record the effects of each item using a journal entry. 

3. Summarize the effects of the journal entries by account, using the T-account format shown in the chapter. 

4. Prepare a classified balance sheet for LDC at the end of 2017. 

5. Using the balance sheet, indicate whether LDC’s assets at the end of the year were financed primarily by liabilities or shareholders’ equity.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Fundamentals of Financial Accounting

ISBN: 978-1259269868

5th Canadian edition

Authors: Fred Phillips, Robert Libby, Patricia Libby, Brandy Mackintosh

Question Posted: