Letty's Laundry and Dry Cleaning Incorporated and Started Business on January

question 11

Essay

Letty's Laundry and Dry Cleaning incorporated and started business on January 1, 2013.
1 Letty's Laundry and Dry Clearing began busine ss by depositing $\$ 30,000$ in a checking account in the name of Letty's Laundry and Dry 1
Cleaning, Inc. for which capit al stock is issued.

2 Borrowed $\$ 6,000$ from City Bank.
3 Purchased equipment from Washers Wholesale, $\$ 16,200$ .
4 Purchased supplies costing $\$ 3,000$ from Suds'n Stuff for cash
5 Paid one montlis rent for business space in Pine Plaza, $\$ 1,000$ .
6 Servic esprovided to customers during J anuary totaled $\$ 13,400$ . All serviceswere paid for in cash.
7 Paid employee sor January, $\$ 2,240$ .
8 Received and paid the utility bill, $\$ 500$ .
9 Received and paid the telephone bill, $\$ 250$ .
10 Paid dividends to the stockholders, $\$ 2,140$ . Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (10) in a vertical column, and inserting at the right of each number the appropriate letter from the following list:
$\begin{array}{|l|l|}\hline \text { Increase in an asset, decrease in another asset. } & \text { a. } \\\hline \text { Increase in an asset, increase in a liability. } & \text { b. } \\\hline \text { Increase in an asset, increase in stockholders' equity. } & \text { c. } \\\hline \text { Decrease in an asset, decrease in a liability. } & \text { d. } \\\hline \text { Decrease in an asset, decrease in stockholders' equity } & \text { e. } \\\hline\end{array}$

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Definitions:

Operating Activities

Activities that constitute the primary or main activities of a business, directly related to its operations and core business activities.

Net Income

The net income a company earns following the deduction of all expenses and taxes from its total revenues.

Indirect Method

A technique used in cash flow statements to reconcile net income with cash flow from operating activities, by adjusting non-cash transactions and changes in working capital.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues.