Question

During 2022, its first year of operations as a delivery service, Indigo Corporation entered into the following transactions.

1. Issued shares of common stock to investors in exchange for $150,000 in cash.
2. Borrowed $40,000 by issuing bonds.
3. Purchased delivery trucks for $55,000 cash.
4. Received $17,000 from customers for services performed.
5. Purchased supplies for $6,700 on account.
6. Paid rent of $4,200.
7. Performed services on account for $11,700.
8. Paid salaries of $26,800.
9. Paid a dividend of $11,200 to shareholders.
Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders’ Equity in the far right column.
Assets = Liabilities + Stockholders' Equity
Cash+Accounts Accounts Bonds+Common Retained
Receivable+Supplies+Equipment= Payable Payable Stock Earnings
Revenue-Expense-Dividends
1
2
3
4
5
6
7
8
9
10

Answer 1

Indigo Corporation

Assets = Liabilities + Stockholders' Equity

1. Cash $150,000

Common Stock $150,000

2. Cash $40,000

Bonds Payable $40,000

3. Delivery trucks $55,000

Cash ($55,000)

4. Cash $17,000

Accounts Receivable ($17,000)

5. Supplies $6,700

Accounts Payable $6,700

6. Cash ($4,200) ($4,200) Rent expense

7. Accounts Receivable 11,700 $11,700 Service revenue

8. Cash ($26,800) ($26,800) Salaries exp.

9. Cash ($11,200) ($11,200) Dividends

Assets $166,200 = $46,700 + $119,500

Step-by-step explanation:

a) Data and Analysis (Accounting Equation Effect):

1. Cash $150,000 Common Stock $150,000

2. Cash $40,000 Bonds Payable $40,000

3. Delivery trucks $55,000 Cash $55,000

4. Cash $17,000 Accounts Receivable $17,000

5. Supplies $6,700 Accounts Payable $6,700

6. Cash ($4,200) Rent Expense ($4,200)

7. Accounts Receivable $11,700 Service Revenue $11,700

8. Cash ($26,800) Salaries ($26,800)

9. Cash ($11,200) Dividends ($11,200)