Question

Required information (The following information applies to the questions displayed below.) Lisa Frees and Amelia Ellinger have been operating a catering business for several years. In March, the partners plan to expand by opening a retail sales shop. They have decided to form the business as a corporation called Traveling Gourmet, Inc. The following transactions occurred in March: a. Received $103,000 cash from each of the two shareholders to form the corporation, in addition to $4,300 in accounts receivable, $9,900 in equipment, a van (equipment) appraised at a fair value of $17,600, and $2,350 in supplies. Gave the two owners each 960 shares of common stock with a par value of $1 per share. b. Purchased a vacant store for sale in a good location for $590,000, making a $118,000 cash down payment and signing a 10-year mortgage note from a local bank for the rest. c. Borrowed $73,000 from the local bank on a 10 percent, one-year note. d. Purchased food and paper supplies costing $14,800 in March; paid cash. e. Catered four parties in March for $6,500; $2,060 was billed and the rest was received in cash. f. Sold food at the retail store for $18,050 cash; the food and paper supplies used cost $11,290. (Hint: Record two the revenue effect separate from the expense effect.) g. Received a $650 telephone bill for March to be paid in April. h. Paid $593 in gas for the van in March. i. Paid $10,880 in wages to employees who worked in March. j. Paid a $530 dividend from the corporation to each owner. k. Purchased $73,000 of equipment (refrigerated display cases, cabinets, tables, and chairs) and renovated and decorated the new store for $31,500 (added to the cost of the building); paid cash. 2. Identify operating, investing, and financing activities affecting cash flows. Include the direction and amount of the effect. (Cash outflows should be indicated with a minus sign. If there is no effect on the statement of cash flows, select "No effect") Direction and Transaction Type of Activity Amount of Effect

Answer 1

2	Transaction	Type of Activity	Direction and amount of effect
	a.	Financing	+	103000
	b.	Investing	-	118000
	c.	Financing	+	73000
	d.	Operating	-	14800
	e.	Operating	+	4440
				(6500-2060)
	f.	Operating	+	18050
		Operating	-	11290
	g.	No effect	No effect
	h.	Operating	-	593
	i.	Operating	-	10880
	j.	Financing	-	530
	k.	Investing	-	104500
				(73000+31500)