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 balance sheet for LDC at the end of 2017. 

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

Transcribed Image Text:

Assets Liabilities Shareholders' Equity (a) Cash +40,000 Contributed Capital +40,000