Bailey's Boat Shop was started in 2012. During 2012, the company (1) acquired \(\$ 5,000\) cash from the issue of common stock, (2) earned cash revenue of \(\$ 22,000\), (3) paid cash expenses of \(\$ 9,300\), and (4) paid an \(\$ 800\) cash dividend to the stockholders.
Required

a. Record these four events in a horizontal statements model. Also, in the Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). The first event is shown as an example.

b. Why is net income different from the net increase in cash for this business?

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Balance Sheet Income Statement Event Statement of No. Cash == N. Pay + C. Stock. + Ret. Ear. Rev. - Exp. = Net Inc. Cash Flows 1. 5,000 = NA + 5,000 + NA NA NA = NA 5,000 FA