Textbook Problem

Exercise 2-41 Transaction Analysis and Business Activities

The accountant for Compton Inc. has collected the following information:

1. Compton purchased a tract of land from Jacobsen Real Estate for $875,000 cash.
2. Compton issued 2,000 shares of its common stock to George Micros in exchange for $125,000 cash.
3. Compton purchased a John Deere tractor for $86,000 on credit.
4. Michael Romano paid Compton $10,400 cash for services performed. The services had been performed by Compton several month ago for a [ma] price of $12,000 of which Rotunno had previously paid $1,600.
5. Compton paid its monthly payroll by issuing checks totaling $36,250.
6. Compton declared and paid its annual dividend of $5,000 cash

Required:

1. Prepare an analysis of the effects of these transactions on the accounting equation of the business. Use the format below.

2. Indicate whether the transaction is a financing, investing, or operating activity.