During 2010, its first year of operations as a delivery service, Lopez 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 $4,200 on account.

6. Paid rent of $5,600.

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 shown below as a model. ("P/P/E" refers to Property, Plant, and Equipment.)

Illustration3-3

Transcribed Image Text:

Assets Liabilitles Stockholders Equity Prepd. Office Unearned Common Retained Earni Cash + Supp. +Insur.+ Equip. -N/PA/P Serv Rev + StockRev - -Div. (1) +$10,000 (2) +5,000 (3) -5,000 (4) +1,200 (5) +10,000 (6) 900 7) -600 +$10,000 Issued stock +$5,000 +$5,000 +$1.200 +$10,000 Service Revenue $ 900 Rent Expense +5600 +$2,500 + $2,500 10) -00 (11) -4,000 $500 Dividends 4,000 Salaries Expense $15,200$2,500+ $600+ $5,000 $5,000$2,500$1,200 $10,000 $10,000 $4,900-$500 $23,300 $23,300