Brief Exercise $2-6($Algo$)$ Prepaid items and the financial statements model LO $2-6$

Healthy Habits is a fitness consultant company designed to assist people in developing a healthy lifestyle. The company began the

Year $2$ accounting period with $$88,000$ cash; $$29,000$ of common stock; and $$59,000$ of retained earnings. The company experienced

the following events related to the purchase of prepaid insurance during Year $2$:

On April $1,$ Year $2,$ paid $$39,500$ cash for insurance coverage on the gym for one year.

On December $31,$ Year $2,$ the company adjusted the accounts to reflect the amount of insurance used during Year $2.$

Required:

Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of

cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify

the cash flows as operating activities $($OA$),$ investing activities $($IA$),$ or financing activities $($FA$).$ The beginning balances have been

entered.

Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed.

Answer is complete but not entirely correct.