Fruity  Farms was incorporated as a private company on January 1, 2017. The company’s accounts included the following at January 31, 2017: 

During the month of February, the company had the following activities: 

a. Paid a dividend to shareholders of $15,000 

b. Repaid $10,000 cash to a local bank

c. Issued 500 shares for $50,000 cash 

d. Purchased equipment for $30,000, paying $3,000 in cash and signing a note due in six months for the balance 

e. Purchased supplies for $3,000 on account 

Required: 

1. Analyze transactions (a) through (e) to determine their effects on the accounting equation. 

2. Record the transaction effects determined in requirement 1 using a journal entry format. 

3. Summarize the journal entry effects from requirement 2 using T-accounts. 

4. Prepare a classified balance sheet at February 28, 2017. 

5. As of February 28, 2017, has the financing for Fruity Farm’s investment in assets primarily come from liabilities or from shareholders’ equity?

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Accounts Payable $20,000 Land $100,000 Building Bank Overdraft Contributed Capital 50,000 Notes Payable, due 2019 22,000 9,000 Retained Earnings 74,000 75,000 Supplies 3,000 Equipment 47,000