Question

Required:

How each of the following events of series of events and the related adjusting entry will affect the anount of bet income and the amount of cash flow from operating activities reported on te year-end financial statements. Identify the direction of change (increase, decrease, or NA) and the amount of the change. Organize your answers according to the following table. the first event is recorded as an example. If an event does not have a related adjusting entry, record only the effects of the event.

a. Paid $2,300 cash on October 1 to purchase a one-year insurance policy.

b. Purchased $1,100 of supplies on account. Paid $800 cash on accounts payable. The ending balance in the supplies account, after adjustment, was $350.

c. Provided services for $7000 cash.

d. Collected $10,700 in advance for services to be performed in the future. The contract called for services to start on May 1 and to continue for one year.

e. Accured salaries amounting to $4,700.

f. Sold land that cost $18,600 for $18,600 cash.

g. Acquired $46,000 cash from the issue of common stock.

h. Earned $12,000 of revenue on account. Collected $10,980 cash from accounts receivable.

i. Paid cash for other operating expenses of $1,800.

Cash Flows from Net Income Event Operating Activities Adjustment Direction of Amount of Direction of Amount of Change Change Change Change a. NA Decrease 2,300 Adj. Decrease $ 575 NA b.LT Adj. I 1 15 0 O. IL TL T Adj. I Adj. in . . Adj. . Adj. g. Adj. h. Adj. I Adj.

Answer 1

Adjustment f and g will have no impact because they will be treated under financing activities and investing activities in cash flow statement and they will not impact the income statement of the business.

Event Adjustment Net Income Direction of Amount of Change Change Cash flow from Operating Direction of Amount of Change Change Decrease $ 2,300.00 NA Decrease $ 800.00 a NA Decrease $ 575.00 NA b Adj $ $ 750.00 7,000.00 $ 7,000.00 Adj d Adj Decrease Increase NA NA Increase Decrease $ 10,700.00 $ $ 7,133.33 4,700.00 Adj NA Increase NA Increase NA NA NA NA NA NA NA Increase NA Decrease NA Adj NA NA NA NA Increase NA Decrease NA Adj h $ 12,000.00 $ 10,980.00 1 Adj $ 1,800.00 $ 1,800.00 Adj