Question

Exercise 2-41 (Algorithmic) Transaction Analysis and Business Activities The accountant for Compton Inc. has collected the following information: a. Compton purchased a tract of land from Jacobsen Real Estate for $1,016,000 cash. b. Compton issued 2,000 shares of its common stock to George Micros in exchange for $100,000 cash. c. Compton purchased a John Deere tractor for $67,000 on credit. d. Michael Rotunno paid Compton $9,200 cash for services performed. The services had been performed by Compton several months ago for a total price of $10,700 of which Rotunno had previously paid $1,500. e. Compton paid its monthly payroll by issuing checks totaling $29,550. f. Compton declared and paid its annual dividend of $11,000 cash. Required: 1. Prepare an analysis of the effects of these transactions on the accounting equation of the business. Use the format below. If an amount box does not require an entry, leave the cells blank. Enter decreases in account values as negative numbers. If the effect of a transaction is to increase AND decrease the same item i.e. Asset, Liability), enter "0" since the net effect on the item is zero. Assets = Liabilities + Stockholders' Equity Contributed Retained Capital + Earnings a. b. 0 d. 0 - 2. Indicate whether the transaction is a financing, investing, or operating activity. a. Compton purchased a tract of land from Jacobsen Real Estate for $1,016,000 cash. b. Compton issued 2,000 shares of its common stock to George Micros in exchange for $100,000 cash. C. Compton purchased a John Deere tractor for $67,000 on credit. d. Michael Rotunno paid Compton $9,200 cash for services performed. The services had been performed by Compton several months ago for a total price of $10,700 of which Rotunno had previously paid $1,500. e. Compton paid its monthly payroll by issuing checks totaling $29,550. f. Compton declared and paid its annual dividend of $11,000 cash.

Answer 1

SL NO	Assets =	Liabilities +	Shareholders equity
			Contributed capital	+ Retained earnings
A	$ 0
B	$ 100,000		$ 100,000
C	$ 67,000	$ 67,000
D	$ 0
E	- $ 29,550	- $29,550
F	- $ 11,000			- $ 11,000

2) a) Compton purchased a tract of land for $ 10,16,000 is a  Investing activity

b) Compton issue 2,000 shares of its common stock for $ 100,000 is a Financing activity

c) Compton purchased a tractor for credit of $ 67,000 is a Investing activity

d) Michel Rotunno paid to Compton $ 9,200 cash for service performed earlier is an operating activity

e) Compton paid monthly payroll is a operating activity

f) Compton declared and paid annual dividend is a financing activity.