Question

The Candle Shop experienced the following events during its first year of operations, Year1
1. Acquired cash by issuing common stock
2. Paid a cash dividend to the stockholders.
3. Paid cash for operating expenses.
4. Borrowed cash from a bank.
5. Provided services and collected cash.
6. Purchased land with cash.
7. Determined that the market value of the land is higher than the historical cost.
Required
a. Indicate whether each event is an asset source, use, or exchange transaction. (Select "NA" if there is no effect on the "Activity classification") Event Activity classification 2. 3. 4. 5. 6. 7
b. Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (), decreases (D), or does not affect (NA) each element of the financial statements. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), financing activities (FA), or not applicable (NA). The first transaction is shown as an example
THE CANDLE SHOP Horizontal Statements Model for Year 1 Balance Sheet Income Statement Statement of Cash Flows Event O. Assets Liabilities+Stockholders' Equity Effect onType CommonRetained RevenueExpense Net Income Cash LandNotes Cash Activity Earnin +NA Payable +NA = | NA NA - NA -INA FA 2 4 5. 7

Answer 1

Answer:

a) 1. Acquired cash by issuing common stock  ⇒ Asset Source

2. Paid a cash dividend to the stockholders  ⇒ Asset Use

3. Paid cash for operating expenses  ⇒ Asset Use

4. Borrowed cash from a bank  ⇒ Asset Source  

5. Provided services and collected cash  ⇒ Asset Source

6. Purchased land with cash  ⇒ Asset Exchange

7. Determined that the market value of the land is higher than the historical cost  ⇒ Not applicable

 

b) I used an excel spreadsheet because there is not enough room here.