Chapter 1, Problem 21EA

For each of the transactions given, tell whether it increases, decreases, or has no effect on shareholders’ equity. Consider both shareholders’ equity components—contributed capital and retained earnings.

1. 1. Two friends get together, each contributing $7,125, to start the Swing Right Golf Supplies Corporation in exchange for common stock.
2. 2. Swing Right purchases equipment for $6,250 cash.
3. 3. Swing Right purchases $3,000 worth of inventory for cash.
4. 4. Swing Right pays expenses of $800 for electricity and phone for the month.
5. 5. Swing Right makes cash sales to customers of $4,685 during the month.
6. 6. Swing Right pays employees $2,000 for hours worked during the month.
7. 7. Swing Right declares and pays $500 dividends to each of its owners at the end of the month.