In: Accounting
7. Consider the effects of the independent transactions, a through i, on a company’s balance sheet, income statement, statement of cash flows, and statement of stockholders’ equity.
a. The company purchased inventory on credit.
b. The company sold all inventory purchased in transaction a) on credit (and for more than its cost).
c. The company collected cash from customers from transaction b).
d. The company purchased equipment with cash.
e. The company paid cash for a note payable that came due.
f. The company paid cash for interest on borrowings.
g. Wages were earned by company employees but not yet paid.
h. The company paid cash in dividends.
i. The company received cash for the issuance of stock.
Complete the table below to explain the effects and financial statement linkages. Use “+” to indicate the account increases and “–” to indicate the account decreases (15 pts).
a. |
b. |
c. |
d. |
e. |
f. |
g. |
h. |
i. |
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Balance sheet |
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Cash |
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Noncash assets |
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Total liabilities |
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Contributed capital |
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Retained earnings |
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Statement of cash flows |
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Operating cash flow |
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Investing cash flow |
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Financing cash flow |
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Income statement |
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Revenues |
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Expenses |
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Net earnings |
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Statement of stockholders’ equity |
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Contributed capital |
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Retained earnings |
a |
b |
c |
d |
e |
f |
g |
h |
|
Balance sheet |
||||||||
Cash |
No effect |
No effect |
+ |
- |
- |
- |
No effect |
- |
Non cash asset |
+ |
+ |
- |
+ |
No effect |
No effect |
No effect |
No effect |
Total liabilities |
+ |
No effect |
No effect |
No effect |
- |
- |
+ |
No effect |
Contributed capital |
No effect |
No effect |
No effect |
No effect |
No effect |
No effect |
No effect |
No effect |
Retained earnings |
- |
+ |
No effect |
No effect |
No effect |
- |
- |
- |
Statement of cash flows |
||||||||
Operating cash flows |
- |
+ |
+ |
No effect |
- |
- |
+ |
No effect |
Investing cash flows |
No effect |
No effect |
No effect |
- |
No effect |
No effect |
No effect |
No effect |
Financing cash flows |
No effect |
No effect |
No effect |
No effect |
No effect |
No effect |
No effect |
- |
Income statement |
||||||||
revenues |
- |
+ |
+ |
- |
- |
- |
- |
No effect |
expenses |
+ |
No effect |
No effect |
+ |
+ |
+ |
+ |
No effect |
Net earnings |
- |
+ |
+ |
No effect |
- |
- |
- |
No effect |
Statement of stock holders equity |
||||||||
Contributed capital |
No effect |
No effect |
No effect |
No effect |
No effect |
No effect |
No effect |
+ |
Retained earnings |
- |
+ |
No effect |
No effect |
No effect |
- |
- |
No effect |