On December 1, Rapid Inc. purchased $7,500 of office equipment. It paid $1,500 cash as a down payment, with the remaining $6,000 ($7,500 - $1,500) due in four monthly installments of $1,500 ($6,000 ÷ 4) beginning January 1. Which of the following is the effect of this transaction on the financial statements?
1) There is an increase in cash flows from operating activities by $1,500 on the statement of cash flows.
2) There are no entries on the income statement.
3) There is an increase in cash flows from investing activities by $1,500 on the statement of cash flows.
4) There are no entries on the balance sheet.
