Rocky owns and operates Balboa's Gym located in Philadelphia. The following transactions occur for the month of October:

October 2 Receive membership dues for the month of October totaling $7,500.

October 5 Issue common stock in exchange for cash, $10,000.

October 9 Purchase additional boxing equipment for $8,600, paying one-half of the amount in cash and the other one-half due by the end of the year.

October 12 Pay $1,000 for advertising regarding a special membership rate available during the month of October.

October 19 Pay dividends to stockholders, $3,400.

October 22 Pay liability insurance to cover accidents to members for the next six months, starting November 1, $6,000.

October 25 Receive cash in advance for November memberships, $4,600.

October 30 Receive, but do not pay, utilities bill for the month, $4,200.

October 31 Pay employees' salaries for the month, $6,300.

Required:

1. Record each transaction.

2. Identify the transactions involving cash.

3. Assuming the balance of cash at the beginning of October is $15,600, post each cash transaction to the Cash T-account and compute the ending cash balance.

4. Prepare a statement of cash flows for the month of October, properly classifying each of the cash transactions into operating, investing, and financing activities.

5. Verify that the net cash flows reported in the statement of cash flows equal the change in the cash balance for the month.