Effect of various transactions on the statement of cash flows. Exhibit 4.16 shows a simplified statement of cash flows for a period. Numbers appear on nine of the lines in the statement. Other lines are various subtotals and grand totals; ignore these in the

rest of the problem. Assume that the accounting cycle is complete for the period and that the firm has prepared all of the financial statements. It then discovers that it has overlooked a transaction. It records that transaction in the accounts and corrects all of the financial statements. For each of the following transactions, indicate which of the numbered lines of the statement of cash flows change and the amount and direction of the change. If net income-line (1)-changes, be sure to indicate whether it decreases or increases. Ignore income tax effects.

a. Amortization of a patent, treated as an expense, \(\$ 600\)

b. Acquisition of a factory site financed by issuing capital stock with a market value of \(\$ 50,000\) in exchange

c. Purchase of inventory on account for \(\$ 7,500\)

d. Uninsured fire loss of merchandise inventory totaling \(\$ 1,500\)

e. Collection of an account receivable totaling \(\$ 1,450\)

f. Issue of bonds for \(\$ 10,000\) cash g. Sale of equipment for its book value of \(\$ 4,500\)

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EXHIBIT 4.22 LARGAY CORPORATION Statement of Cash Flows for the Current Year (Exercise 22) (all dollar amounts in thousands) OPERATIONS Net Income Depreciation Expense Changes in Working Capital Accounts Cash Flow from Operations INVESTING Acquisition of Buildings and Equipment . . FINANCING Repayment of Long-term Debt Change in Cash ... Cash, Beginning of Year. Cash, End of Year . . $100 15 (40) $ 75 (30) (40) $ 5 27 $ 32