Question: The following events occurred during 2015 for Frames Unlimited 1

The following events occurred during 2015 for Frames Unlimited:
1. Purchased inventory for $60,000 in cash.
2. Recorded $40,000 in insurance expense for the portion of an insurance policy acquired in 2011 that expired during 2015.
3. Paid $40,000 for rental space that the company will not use until 2016.
4. Sold land with a cost of $80,000 for $94,000 cash.
5. Paid $90,000 on a long-term note. Included in the $90,000 is $15,000 in interest, $9,000 of which was accrued in 2014.
6. Recorded bad debt expense in the amount of $30,000 (allowance method).
7. Reissued 5,000 shares of treasury stock for $30 per share. The stock was acquired at $18 per share.
8. Declared and issued a stock dividend. Ten thousand shares of common stock ($10 par value) were issued with a fair market value of $25 per share at the time.
9. Issued $500,000 face value bonds for cash at a total discount of $25,000.
10. Purchased a building for $100,000 in cash, $50,000 in common stock, and a note with a present value of $217,000.
11. Recorded $35,000 in sales to customers on account.
Frames Unlimited is in the process of preparing a statement of cash flows under the direct method.

Use a chart like the one in this problem to indicate the following:
a. The section of the statement of cash flows in which each transaction should be listed. Use the following terms:
(1) Operating—for operating activities
(2) Investing—for investing activities
(3) Financing—for financing activities
(4) N/A—for items that would not be included on the statement of cash flows
b. Whether the transaction would involve an inflow or an outflow of cash.
c. The dollar amount, if appropriate, that the company would report on the statement of cash flows.
The first transaction is done for you as anexample.

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  • CreatedAugust 19, 2014
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