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Question & Answer: Exercise 3-3 During 2017,its first year of operations as a delivery service, Sheffield Corp. entered into the following transactions. 1……

Exercise 3-3 During 2017,its first year of operations as a delivery service, Sheffield Corp. entered into the following transactions. 1. Issued shares of common stock to investors in exchange for $195,000 in cash. 2. Borrowed $46,000 by issuing bonds. 3. Purchased delivery trucks for $51,000 cash. 4. Received $18,000 from customers for services performed. 5. Purchased supplies for $3,600 on account. 6. Paid rent of $4,700. 7. Performed services on account for $11,700. 8. Paid salaries of $28,200. 9. Paid a dividend of $11,700 to shareholders.
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Exercise 3-3 During 2017,its first year of operations as a delivery service, Sheffield Corp. entered into the following transactions. 1. Issued shares of common stock to investors in exchange for $195,000 in cash. 2. Borrowed $46,000 by issuing bonds. 3. Purchased delivery trucks for $51,000 cash. 4. Received $18,000 from customers for services performed. 5. Purchased supplies for $3,600 on account. 6. Paid rent of $4,700. 7. Performed services on account for $11,700. 8. Paid salaries of $28,200. 9. Paid a dividend of $11,700 to shareholders.

Expert Answer

 

Accounting equation is
Assets = Liabilities + Capital
Assets Liabilities Stockholders Equity Reason for entry
Entry Particulars Cash Accounts Prepaid Supplies Prepaid Delivery Truck Bonds Accounts Unearned Common Retained
Receivables Rent Salaries Payable Payable Revenue Stock Earnings
1) Issued shares 195000 195000 Common stock issued represents amount invested by stockholders
2) Borrowed by issuing bonds 46000 46000 Amount borrowed is a liability
Balance 241000 0 0 0 0 0 46000 0 0 195000 0
3) Purchased Delivery Truck -51000 51000 Truck purchased is an asset
Balance 190000 0 0 0 0 51000 46000 0 0 195000 0
4) Received From Customer 18000 18000 Services Performed represents amount earned by business
Balance 208000 0 0 0 0 51000 46000 0 0 195000 18000
5) Purchased Supplies 0 3600 3600 Supplies Purchased represents stock of supplies purchased
Balance 208000 0 0 3600 0 51000 46000 3600 0 195000 18000
6) Rent Paid -4700 4700 0 Rent paid represents rent paid in advance
Balance 203300 0 4700 3600 0 51000 46000 3600 0 195000 18000
7) Services Performed 0 11700 11700 Services Performed represents amount earned by business
Balance 203300 11700 4700 3600 0 51000 46000 3600 0 195000 29700
8) Paid salaries -28200 28200 0 Salaries paid represents expense paid in advance
Balance 175100 11700 4700 3600 28200 51000 46000 3600 0 195000 29700
9) Dividend Paid -11700 -11700 Dividend represnts amount distributed to shareholders as profit
Balance 163400 11700 4700 3600 28200 51000 46000 3600 0 195000 18000

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