Problem 1-1A Identifying effects of transactions on financial statements LO A1, P1
Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a " + " and the dollar amount in the column or columns. For decreases, place a "-" and the dollar amount in the column or columns. Some cells may contain both an increase (+) and a decrease (-) along with dollar amounts. The first transaction is completed as an example.
Required:
a. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statement, identify how each transaction affects net income.
b. For the statement of cash flows, identify how each transaction affects cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.
Solution
a |
b |
||||||||
Balance Sheet |
Income Statement |
Statement of Cash Flows |
|||||||
Transactions |
Total Assets |
Total Liabilities |
Total Equity |
Net Income |
Operating Activities |
Investing Activities |
Financing Activities |
||
1 |
Owner invests $900 cash in business in exchange for stock |
+900 |
+900 |
+900 |
|||||
2 |
Received 700 cash for services provided |
+700 |
+700 |
+700 |
+700 |
||||
3 |
Paid 500 cash for employee wages |
-500 |
-500 |
-500 |
-500 |
||||
4 |
Buys 100 equipment on credit |
+100 |
+100 |
||||||
5 |
Purchased 200 of supplies on credit |
+200 |
+200 |
||||||
6 |
Buys $300 equipment for cash |
+300/ -300 |
-300 |
||||||
7 |
Pays $200 on accounts payable |
-200 |
-200 |
-200 |
|||||
8 |
Provides $400 services on account |
+400 |
+400 |
+400 |
|||||
9 |
Pays $50 cash for dividends |
-50 |
-50 |
-50 |
|||||
10 |
Collects $400 cash on accounts receivable |
+400/-400 |
+400 |
Notes:
Hence, though supplies forms part of operating activities, the same is not reported as operating activity as supplies are purchased on credit and not for cash.
However, the indirect method of cash flow statement reports supplies and accounts payable as part of adjustments to net income, direct method only considers the actual payment of cash.
Payment of $200 towards accounts payable forms part of cash flow statement as there is movement of cash.
Also, services provided on account or purchase of equipment or supplies on account do not form part of cash flow statement.
Only the transactions that involve actual movement of cash are shown in the cash flow statement.
account payable 200. -200$ operating activities
Problem 1-1A Identifying effects of transactions on financial statements LO A1, P1
Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a "t" and the dollar amount in the column or columns. For decreases, place a "-" and the dollar amount in the column or columns. Some cells may contain both an increase (t) and a decrease (-) along with dollar amounts. The first transaction is completed as an example.Required:a. For the balance sheet, identify how each transaction affects total assets, total liabilities, and...
Identify how each of the following separate transactions 1
through 10 affects financial statements. For increases, place a “+”
and the dollar amount in the column or columns. For decreases,
place a “−” and the dollar amount in the column or columns. Some
cells may contain both an increase (+) and a decrease (−) along
with the dollar amounts. The first transaction is completed as an
example.Required:a. For the balance sheet, identify how each transaction
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