Flick Company was started on January 1, 2007, and experienced the following events during its first year of operation.

1. Acquired \($30,000\) cash from the issue of common stock.

2. Borrowed \($20,000\) cash from State Bank.

3. Earned cash revenues of \($48,000\) for performing services.

4. Paid cash expenses of $35,000.

5. Paid a \($4,000\) cash dividend to the stockholders.

6. Acquired an additional \($20,000\) cash from the issue of common stock.

7. Paid \($5,000\) cash to reduce the principal balance of the bank note.

8. Paid \($53,000\) cash to purchase land.

9. Determined the market value of the land to be $60,000.

Required:

a. Record the preceding transactions in the horizontal statements model. Also, in the Cash Flows col¬ umn, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). The first event is shown as an example.

b. Determine the amount of total assets that Flick would report on the December 31, 2007, balance sheet.

c. Identify the sources of the assets that Flick would report on the December 31, 2007, balance sheet. Determine the amount of each of these sources.

d. Determine the net income that Flick would report on the 2007 income statement. Explain why div¬ idends do not appear on the income statement.

e. Determine the net cash flows from operating activities, financing activities, and investing activi¬ ties that Flick would report on the 2007 statement of cash flows.

f. Determine the percentage of assets that was provided by investors, creditors, and earnings.

Transcribed Image Text:

Balance Sheet Income Statement Event Statement of No. Cash + Land 13 N. Pay. + Com. Stk. + Ret. Earn. Rev. - Exp. = Net Inc. Cash Flows 1. 30,000 + NA NA + 30,000 NA NA - - NA == NA 30,000 FA