During 2012, its first year of operations as a delivery service, Underwood Corp.

entered into the following transactions.

1. Issued shares of common stock to investors in exchange for $100,000 in cash.

2. Borrowed $45,000 by issuing bonds.

3. Purchased delivery trucks for $60,000 cash.

4. Received $16,000 from customers for services provided.

5. Purchased supplies for $4,700 on account.

6. Paid rent of $5,200.

7. Performed services on account for $10,000.

8. Paid salaries of $28,000.
9. Paid a dividend of $11,000 to shareholders.
Instructions Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders’ Equity in the right-hand margin.
Use Illustration 3-3 (page 110) as a model.

Transcribed Image Text:

Stockholders' Equity Retained Earnings Expenses Dividends Accounts Assets Liabilities Equip Accounts Cash + Receivable + Supplies + ment Common = Payable + Payable + Stock Bonds Revenues