The Candle Shop experienced the following events during its first year of operat

Question

The Candle Shop experienced the following events during its first year of operations, Year 1:

Acquired cash by issuing common stock.

Paid a cash dividend to the stockholders.

Paid cash for operating expenses.

Borrowed cash from a bank.

Provided services and collected cash.

Purchased land with cash.

Determined that the market value of the land is higher than the historical cost.

b. Use a horlzontal statements model to show how each event affects the balance sheet, income statement, and statement of cash lows. Indicate whether the event increases (D. decreases (D), or does not affect (NA) each element of the financial statements. Also, In the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (A), financing activities (FA), or not applicable (NA). The first transaction is shown as an example. Balance Sheet of Cash F Net Effect on Type of +NA NA NA NA NA FA

Explanation / Answer

Event No cash + land = Notes payable + common stock + retained earnings revenue - expense = Net income Effect on cash Type of activity 1 I NA NA I NA NA NA NA I FA 2 D NA NA NA D NA NA NA D FA 3 D NA NA NA D NA I D D OA 4 I NA I NA NA NA NA NA I FA 5 I NA NA NA I I NA I I OA 6 D I NA NA NA NA NA NA D IA 7 NA

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