,FundamentalmFinancialmAccountingmConcepts,m10em (Edmonds)mC
hapterm1m AnmIntroductionmtomAccounting
Indicatemhow meachmevent maffectsmthemelementsmof mfinancialmstatements.mUsemthemfollowingmlettersm
tomrecord myourmanswerminmthemboxmshownmbelow meachmelement.mYoumdomnot mneed mtomentermamoun
ts.m(Notemthat m"NomEffect"mmeansmthat mthemevent mdoesmnot meffectmthatmelement mof mthemfinancialmsta
tementsmormthat mthemevent mcausesmanmincreaseminmthat melement mismoffset mbymamdecreaseminmthat msam
emelement.)
Increasem=mI Decreasem=mDm NomEffect m=mNA
1) WalkermCo.missued mcommonmstockmform$150,000mcash.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (I)m(NA)m(I)m(NA)m(NA)m(NA)m(I)
Issuingmcommonmstockmismanmasset msourcemtransactionmthat mincreasesmthembusiness'smassetsm(cas
h)mand mitsmstockholders'mequitym(commonmstock).mIt mdoesmnot maffect mthemincomemstatement,mbut
mismreported masmamcashmflow mfrommfinancingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
2) NguyenmCo.mborrowed m$50,000mcashmfrommMetropolitanmBank.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (I)m(I)m(NA)m(NA)m(NA)m(NA)m(I)
Borrowingmcashmismanmasset msourcemtransactionmthat mincreasesmambusiness'smassetsm(cash)mand mitsmli
abilitiesm(notesmpayable).mIt mdoesmnot maffect mthemincomemstatement,mbut mismreported masmamcashmflow
mfrommfinancingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
1
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.
,3) BellmCo.mprovided mconsultingmservicesmform$20,000mcash.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (I)m(NA)m(I)m(I)m(NA)m(I)m(I)
Thismismanmasset msourcemtransactionmthat mincreases mthembusiness'smassetsm(cash). mWhenmambusinessm
providesmservices,mit mearnsmrevenue.mRevenuemincreasesmnet mincome,mwhichmwillm increasemequitym(
retained mearnings)mat mthemend mof mthemaccountingmperiod.mThismevent mismreported masmamcashmflow mfro
mmoperatingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
4) PiercemCo.mpaid m$40,000mcashmtompurchasemland.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (NA)m(NA)m(NA)m(NA)m(NA)m(NA)m(D)
Purchasingm land mformcashmismanmasset mexchangemtransactionmthat mincreasesmonemasset m(land)ma
nd mdecreasesmanothermasset m(cash).mIt mdoesmnot maffect mthemincomemstatement,mand mismreported
masmanminvestingmactivityminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
2
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.
, 5) PerezmCo.mpaid m$220,000mcashmformsalariesmexpense.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (D)m(NA)m(D)m(NA)m(I)m(D)m(D)
Payingmexpensesmismanmasset musemtransactionmthat mdecreasesmthembusiness'smassetsm(cash)mand mdecr
easesmitsmequitym(retained mearnings).mNotemthat mthemexpensemdecreasesmnet mincome,mand mwillmdecre
asemretained mearningsmat mthemend mof mthemaccountingmperiod.mIt mismreported masmamcashmflow mformoper
atingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
6) EpsteinmCo.mpaid m$20,000minmcashmdividendsmtomitsmowners.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (D)m(NA)m(D)m(NA)m(NA)m(NA)m(D)
Payingmamcashmdividend mismanmasset musemtransactionmthat mdecreasesmambusiness'smassetsm(cash)mand m
itsmequitym(retained mearnings).Themdividendsmaccount mwillmdecreasemthemretained mearningsmat mtheme
nd mof mthemaccountingmperiod.mIt mdoesmnot maffectmnet mincome,mand mismreported masmamcashmflow mformfi
nancingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
3
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.
hapterm1m AnmIntroductionmtomAccounting
Indicatemhow meachmevent maffectsmthemelementsmof mfinancialmstatements.mUsemthemfollowingmlettersm
tomrecord myourmanswerminmthemboxmshownmbelow meachmelement.mYoumdomnot mneed mtomentermamoun
ts.m(Notemthat m"NomEffect"mmeansmthat mthemevent mdoesmnot meffectmthatmelement mof mthemfinancialmsta
tementsmormthat mthemevent mcausesmanmincreaseminmthat melement mismoffset mbymamdecreaseminmthat msam
emelement.)
Increasem=mI Decreasem=mDm NomEffect m=mNA
1) WalkermCo.missued mcommonmstockmform$150,000mcash.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (I)m(NA)m(I)m(NA)m(NA)m(NA)m(I)
Issuingmcommonmstockmismanmasset msourcemtransactionmthat mincreasesmthembusiness'smassetsm(cas
h)mand mitsmstockholders'mequitym(commonmstock).mIt mdoesmnot maffect mthemincomemstatement,mbut
mismreported masmamcashmflow mfrommfinancingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
2) NguyenmCo.mborrowed m$50,000mcashmfrommMetropolitanmBank.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (I)m(I)m(NA)m(NA)m(NA)m(NA)m(I)
Borrowingmcashmismanmasset msourcemtransactionmthat mincreasesmambusiness'smassetsm(cash)mand mitsmli
abilitiesm(notesmpayable).mIt mdoesmnot maffect mthemincomemstatement,mbut mismreported masmamcashmflow
mfrommfinancingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
1
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.
,3) BellmCo.mprovided mconsultingmservicesmform$20,000mcash.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (I)m(NA)m(I)m(I)m(NA)m(I)m(I)
Thismismanmasset msourcemtransactionmthat mincreases mthembusiness'smassetsm(cash). mWhenmambusinessm
providesmservices,mit mearnsmrevenue.mRevenuemincreasesmnet mincome,mwhichmwillm increasemequitym(
retained mearnings)mat mthemend mof mthemaccountingmperiod.mThismevent mismreported masmamcashmflow mfro
mmoperatingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
4) PiercemCo.mpaid m$40,000mcashmtompurchasemland.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (NA)m(NA)m(NA)m(NA)m(NA)m(NA)m(D)
Purchasingm land mformcashmismanmasset mexchangemtransactionmthat mincreasesmonemasset m(land)ma
nd mdecreasesmanothermasset m(cash).mIt mdoesmnot maffect mthemincomemstatement,mand mismreported
masmanminvestingmactivityminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
2
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.
, 5) PerezmCo.mpaid m$220,000mcashmformsalariesmexpense.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (D)m(NA)m(D)m(NA)m(I)m(D)m(D)
Payingmexpensesmismanmasset musemtransactionmthat mdecreasesmthembusiness'smassetsm(cash)mand mdecr
easesmitsmequitym(retained mearnings).mNotemthat mthemexpensemdecreasesmnet mincome,mand mwillmdecre
asemretained mearningsmat mthemend mof mthemaccountingmperiod.mIt mismreported masmamcashmflow mformoper
atingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
6) EpsteinmCo.mpaid m$20,000minmcashmdividendsmtomitsmowners.
Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows
Answer:m (D)m(NA)m(D)m(NA)m(NA)m(NA)m(D)
Payingmamcashmdividend mismanmasset musemtransactionmthat mdecreasesmambusiness'smassetsm(cash)mand m
itsmequitym(retained mearnings).Themdividendsmaccount mwillmdecreasemthemretained mearningsmat mtheme
nd mof mthemaccountingmperiod.mIt mdoesmnot maffectmnet mincome,mand mismreported masmamcashmflow mformfi
nancingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
3
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.
