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.
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 for LDC at the end of 2017.
5. Using the indicate whether LDC’s assets at the end of the year were financed primarily by liabilities or shareholders’ equity.
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