Question

Delta Land Co. was formed when it acquired cash from the issue of common stock. The company then issued bonds at a premium on January 1, 2013. Interest is payable annually on December 31 of each year, beginning December 31, 2013. On January 2, 2013, Delta Land Co. purchased a piece of land and leased it for an annual rental fee. The rent is received annually on December 31, beginning December 31, 2013. At the end of the eight-year period (December 31, 2020), the land was sold at a gain, and the bonds were paid off. A summary of the transactions for each year follows:
2013
1. Acquired cash from the issue of common stock.
2. Issued eight-year bonds.
3. Purchased land.
4. Received land rental income.
5. Recognized interest expense including the amortization of the premium and made the cash payment for interest on December 31.
6. Prepared the December 31 entry to close Rent Revenue.
7. Prepared the December 31 entry to close Interest Expense.
2014–2019
8. Received land rental income.
9. Recognized interest expense including the amortization of the premium and made the cash payment for interest on December 31.
10. Prepared the December 31 entry to close Rent Revenue.
11. Prepared the December 31 entry to close Interest Expense.
2020
12. Sold land at a gain.
13. Retired bonds at face value.

Required
Identify each of these 13 events and transactions as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Explain how each event affects assets, liabilities, equity, net income, and cash flow by placing a + for increase, – for decrease, or NA for not affected under each category. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA).


Delta Land Co.
2013

Event No.
Type of Event


Assets

=

Liabilities

+
Common Stock

+
Retained Earnings

Net Income


Cash Flow
















1.
AS

+

NA

+

NA

NA

+ FA

2.
AS

+

+

NA

NA

NA

+ FA

3.
AE

+(

NA

NA

NA

NA

( IA

4.
AS

+

NA

NA

+

+

+ OA

5a.
CE

NA

(

NA

+

+

NA

5b.
AU

(

NA

NA

(

(

( OA

6.
Closing

NA

NA

NA

NA

NA

NA

7.
Closing

NA

NA

NA

NA

NA

NA

8.
AS

+

NA

NA

+

+

+ OA

9a.
CE

NA

(

NA

+

+

NA

9b.
AU

(

NA

NA

(

(

( OA

10.
Closing

NA

NA

NA

NA

NA

NA

11.
Closing

NA

NA

NA

NA

NA

NA

12.
AS/AE

+

NA

NA

+

+

+ IA

13.
AU

(

(

NA

NA

NA

( FA
















The first event is recorded as anexample.


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  • CreatedOctober 26, 2013
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