Lighthouse Services experienced the following transactions during 2006.

1. Acquired cash by issuing common stock.
2. Received cash for performing services.
3. Paid cash expenses.
4. Borrowed cash from the local bank.
5. Purchased land for cash.
6. Paid cash to reduce the principal balance of the bank loan.

7. Paid a cash dividend to the stockholders.
8. Determined the market value of the land to be higher than its historical cost.

Required:

Use a horizontal statements model to show how each event affects the balance sheet, income state¬ ment, and statement of cash flows. Indicate whether the event increases (I), decreases (D), or does not affect (NA) each element of the financial statements. Also, in the Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). The first trans¬ action is shown as an example.

Transcribed Image Text:

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