For each of the transactions given next, tell whether it (1) increases, (2) decreases, or (3) has no effect on shareholders’ equity. Consider both shareholders’ equity components—contributed capital and retained earnings.
1. Two friends get together, each contributing $25,000 in cash, to start Luna’s Pet Luau in exchange for common stock.
2. Luna’s purchases a company van for $30,000 cash.
3. Luna’s buys $2,250 worth of supplies for cash and uses them all right away.
4. Luna’s pays cash expenses of $2,150 for gas and auto insurance.
5. Luna’s earns service revenue from customers of $8,150 during the month and receives payment in cash.
6. Luna’s pays its employees $465 cash for hours worked during the month.
7. Luna’s declares and distributes $360 cash dividends to each of its owners at the end of the month.