Reference no: EM131289041

Exercise 1

Classify each of the following transactions as an operating activity, an investing activity or a financing activity cash flow, or a non cash transaction - Indicate also its effect on the Income statement (increase or decrease the profit)

1. Provide services for cash
2. Purchase marketable securities for cash
3. Paid cash for rent
4. Received interest on note receivable
5. Paid cash for salaries
6. Received advance payment for services
7. Paid a cash dividend
8. Provide services on account
9. Bought land with cash
10. Collected cash from receivables
11. Issued common stock for cash
12. Repaid principal and interest on a note payable
13. Declared a stock split
14. Purchased inventory with cash
15. Recorded depreciation of fixed asset
16. Paid insurance with cash
17. Issued a note payable in exchange for equipment

Exercise 2

Prepare the statement of Cash flows for 2007, using the indirect method, with the financial statements and additional information as below:

Additional information
1. Purchased land for $ 112,000
2. Purchased new equipment for $ 100,000
3. Sold old equipment that costs $ 132,000 with accumulated depreciation of
$ 102,000 for 20,000 cash. This transaction generated a loss of $ 10,000
4. Issued common stock for $ 50,000

BALANCE SHEET
Assets	2006		2007
Cash	40,600		68,800
Accounts Receivable	22,000		30,000
Inventory	176,000		160,000
Prepaid Rent	4,800		2,400
Equipment	288,000		256,000
Accumulated depreciation	(236,000)		(156,800)
Land	80,000		192,000
Total Assets	375,400		552,400
Liabilities & Equity Accounts Payable	76,000		67,000
Salaries Payable Stockholders' Equity Common stock	24,000   200,000		28,000   250,000
Retained Earnings	75,400		207,400
Total Liabilities & Equity	375,400		552,400
INCOME STATEMENT 2007
Sales	1,500,000
Cost of Goods sold	797,200
Gross profit	702,800
Operating expenses Depreciation	22,800
Rent	24,000
Salaries	256,000
Other operating expenses	258,000
	560,800
Operating Income	142,000
Loss on disposal of assets	10,000
Net Income	132,000

Attachment:- slides-cash-flow.rar