Question: Overnight Delivery Inc. is incorporated on February
Overnight Delivery Inc. is incorporated on February 1 and enters into the following transactions during its first month of operations:
Required:
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1.
Exhibit 3-1:
2. Explain why you agree or disagree with the following: The transactions on February 28 all represent expenses for the month of February because cash was paid. The transaction on February 27 does not represent an expense in February because cash has not yet been paid.
Transcribed Image Text:
February 15: Received $8,000 cash from customer accounts. February 26: Provided $16,800 of services on account during the month. February 27: Received a $3,400 bill from the local service station for gas and oil used during February. February 28: Paid $400 for wages earned by employees for the month. February 28: Paid $3,230 for February advertising. February 28: Declared and paid $2,000 cash dividends to stockholders. Assets Liabilities Stockholders' Equity Trans. Accounts Accounts Notes Capital Retained No. Cash Receivable Equipment Building Land Payable Payable Stock Earnings 1 $100,000 $100,000 2 $150,000 $50,000 $200,000 Bal. $100,000 $150,000 $50,000 $200,000 $100,000 3 $20,000 $20,000 Bal. $100,000 $20,000 $150,000 $50,000 $20,000 $200,000 $100,000 4 $15,000 $ 15,000 Bal. $100,000 $15,000 $20,000 $150,000 $50,000 $20,000 $200,000 $100,000 $ 15,000 5,000 5,000 Bal. $105,000 $15,000 $20,000 $150,000 $50,000 $20,000 $200,000 $100,000 $ 20,000 6 -10,000 -10,000 $ 95,000 $15,000 $20,000 $150,000 $50,000 $20,000 $200,000 $100,000 $ 10,000 Bal. -3,000 $ 92,000 -3,000 $ 7,000 Bal. $15,000 $20,000 $150,000 $50,000 $20,000 $200,000 $100,000 8. 4,000 -4,000 Bal. $ 96,000 $11,000 $20,000 $150,000 $50,000 $20,000 $200,000 $100,000 $ 7,000 -2,000 -2,000 $ 94,000 $11,000 $20,000 $150,000 $50,000 $20,000 $200,000 $100,000 $ 5,000 Total assets: $325,000 Total liabilities and Stockholders' Equity: $325,000 LO 9.
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