Question

Saved Required Explain how each of the following events or series of events and the related adjusting entry will affect the amount of net income and the amount of cash flow from operating activities reported on the 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. (Not all cells require entry. Do not round intermediate calculations and round your final answers to nearest whole dollar amount.) a. Paid $2,400 cash on October 1 to purchase a one-year insurance policy. b. Purchased $1,450 of supplies on account. Paid $700 cash on accounts payable. The ending balance in the Supplies account, after adjustment, was $350. c. Provided services for $7,300 cash. d. Collected $10,500 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. Accrued salaries amounting to $3,500. f. Sold land that cost $18,600 for $18,600 cash. g. Acquired $48,500 cash from the issue of common stock. h. Earned $12,000 of revenue on account. Collected $10,800 cash from accounts receivable. 1. Paid cash operating expenses of $1,750 Net Income Cash Flows from Event Operating Activities Adjustment Direction of Amount of Direction of Amount of Change Change Change Change NA Decrease $ 2,400 Adi Decrease $ 600 NA b Adj. Adi d Ad).

Answer 1

Required:

Event / Adjustment	Net income		Cash flow from operating activities
	Direction of change	Amount of change	Direction of change	Amount of change
a	NA		Decrease	$2,400
Adj	Decrease	$600	NA
b	NA		Decrease	$700
Adj	Decrease	$1,100 (1,450 - 350)	NA
c	Increase	$7,300	Increase	$7,300
Adj	NA		NA
d	NA		Increase	$10,500
Adj	Increase	$7,000 (10,500 * 7/12)	NA
e	Decrease	$3,500	NA
Adj	NA		NA
f	NA		NA
Adj	NA		NA
g	NA		NA
Adj	NA		NA
h	Increase	$12,000	Increase	$10,800
Adj	NA		NA
i	Decrease	$1,750	Decrease	$1,750
Adj	NA		NA