Effects of transactions an 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 acquires a building costing $400,000, paying 540,000 cash and signing a promissory note to the seller for $360,000.
b. A firm using the allowance method records $32,000 of bad debt expense for the period.
c. A firm using the allowance method writes off accounts totaling $28,000 as uncollectible.
d. A firm owns 30% of the common stock of an investee acquired several years ago at carrying value. The investee had net income of $40,000 and paid dividends of $50,000 during the period.
e. A firm sells for $22,000 marketable equity securities (available for sale) originally costing $25,000 and with a carrying value of $23,000 at the time of sale.
f. Holders of a firm’s preferred stock with a carrying value of $10,000 convert their preferred shares into common stock with a par value of $2,000. Use the book value method.
g. A firm gives land with an acquisition cost and market value of $5,000 in settlement of the annual legal fees of its corporate attorney
h. A firm reduces the liability account Rental Fees Received in Advance for $8,000 when it provides rental services.
i. A firm reclassifies long-term debt of $30,000, maturing within the next year, as a currentliability.

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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