Financial Accounting: In an Economic Context

EXERCISES

E2-1

Identifying financing, investing, and operating transactions

Listed below are eight transactions. In each case, identify whether the transaction is an example of financing, investing, or operating activities and which of the financial statements it would affect.

1. Common stock is issued for $500,000 in cash.
2. Twenty units of inventory are sold for $50 each.
3. Employee wages are paid.
4. A new warehouse facility is purchased.
5. Principal payments on outstanding debt are paid.
6. Dividends are paid to the shareholders.
7. A 4-year-old vehicle, used as a delivery truck, is sold for $9,000, its book value.
8. A utility bill for March is paid in April.

E2-2

Identifying financing, investing, and operating transactions

Listed below are eight transactions. In each case, identify whether the transaction is an example of financing, investing, or operating activities and which of the financial statements it would affect.

1. Company borrows $50,000 in cash, signing a 10-year note payable.
2. Twenty units of inventory are purchased from suppliers on account for $12,000.
3. The utility bill is paid at the end of the month, $5,200.
4. Services are performed, and customers are billed for $13,000.
5. Five parcels of real estate are purchased for a total of $55,000 in cash.
6. A long-term investment in an equity security is sold for $4,500 cash.
7. Principal payments are made on outstanding debts.
8. Cash is received from customers for services completed in a previous period.

E2-3

Balance sheet or income statement account? ...