Effects of transactions on statement of cash flows. Exhibit 5.16 in Chapter 5 provides a simplified statement of cash flows. For each of the transactions that follow, indicate the number(s) of the line(s) in Exhibit 5.16 affected by the transaction and the amount and direction (increase or decrease) of the effect. If the transaction affects net income on line (3) or cash on line (11), be sure to indicate if it increases or decreases the line. Expand the definition of Line (1) to include receipts from other operating revenue sources. Ignore income tax effects. Indicate the effects of each transaction on the Cash Change Equation.

a. A firm using the percentage-of-completion method for long-term contracts recognizes $ 15,000 of revenue for the period.
b. A local government donates hind with a fair value of $50,000 to a firm as an inducement to locate manufacturing facilities in the area.
c. A firm writes down long-term investments in securities by $8,000 to reflect a decrease in fair value
d. A firm records $60,000 depreciation on manufacturing facilities for the period. The firm has sold all goods it manufactured this period.
e. A firm using the allowance method recognizes $35,000 as warranty expense for the period.
f. A firm using the allowance method makes expenditures totaling $28,000 to provide warranty services during the period.
g. A firm recognizes income tax expense of $80,000 for the period, comprising $100,000 paid currently and a $20,000 reduction in the Deferred Income Tax Liability account.
h. A firm writes down inventories by $18,000 to reflect the lower-of-cost-or-marketvaluation.

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Simplified Statement of Cash Flows (Problem 5.5 for Self-Study) EXHIBIT 5.16 Operations Cash Receipts from Customers Less: Cash Payments to Suppliers, Employees, and Others Cash Flow from Operations [- (1) - (2)] .. (1) -(2) S1 Reconciliation of Net Income to Cash Flow from Operations Net Income .... Additions to Net Income to Compute Cash Flow from Operations Subtractions from Net Income to Compute Cash Flow from Operations.. Cash Flow from Operations [- (3) + (4) - (5)1 - +(4) (5) 51 Investing Proceeds from Dispositions of "Investing" Assets.. Cash Used to Acquire "Investing" Assets. Cash Flow from Investing [- (6) - (7)) +(6) -(7) S2 Financing +(8) (9) (10) Cash Provided by Increases in Debt or Capital Stock. Cash Used to Reduce Debt or Capital Stock.... Cash Used for Dividends.. Cash Flow from Financing (- (8) - (9) - (10)). Net Change in Cash [- 51 + S2 + 53] Cash, Beginning of the Period... Cash, End of the Period [- (11) + S4 . S3 (11) 54 55