Answered: Required: 1. Analyze each item for its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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E2-12 (Algo) Analyzing the Effects of Transactions Using T-Accounts; Preparing and Interpreting a Balance Sheet [LO 2-2, LO 2-3, LO 2-4]

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[The following information applies to the questions displayed below.]

Laser Delivery Services, Incorporated (LDS), was incorporated January 1. The following transactions occurred during the year:

Received $35,000 cash from the company's founders in exchange for common stock.
Purchased land for $10,000, signing a two-year note (ignore interest).
Bought two used delivery trucks at the start of the year at a cost of $11,000 each; paid $3,000 cash and signed a note due in three years for $19,000 (ignore interest).
Paid $1,000 cash to a truck repair shop for a new motor, which increased the cost of one of the trucks.
Stockholder Jonah Lee paid $240,000 cash for a house for his personal use.

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Required information
E2-12 (Algo) Analyzing the Effects of Transactions Using T-Accounts; Preparing and Interpreting a
Balance Sheet (LO 2-2, LO 2-3, LO 2-4]
[The following information applies to the questions displayed below.]
Laser Delivery Services, Incorporated (LDS), was incorporated January 1. The following transactions occurred during the
year:
a. Received $35,000 cash from the company's founders in exchange for common stock.
b. Purchased land for $10,000, signing a two-year note (ignore interest).
c. Bought two used delivery trucks at the start of the year at a cost of $11,000 each; paid $3,000 cash and signed a note
due in three years for $19,000 (ignore interest).
d. Paid $1,000 cash to a truck repair shop for a new motor, which increased the cost of one of the trucks.
e. Stockholder Jonah Lee paid $240,000 cash for a house for his personal use.
E2-12 (Algo) Part 1
Required:
1. Analyze each item for its effects on the accounting equation of Laser Delivery Services for the year ended December 31. (Enter any
decreases to account balances with a minus sign.)
TIP: Transaction (a) is presented below as an example.
TIP: The new motor in transaction (d) is treated as an increase to the cost of the truck.

Stockholders'
Assets
Liabilities
Equity
Notes
Payable
(long-term)
Accounts
Cash
Equipment
Land
+
Common Stock
Payable
Beginning Balance
0 +
а.
35,000
35,000
b.
C.
d.
е.
Ending Balance
35,000
0 =
35,000
+
+
+
+ +
II
II
IL I| || I || ||

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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