Daley Company was started on January 1, Year 1, and experienced the following events during its first year of operation:
1. Acquired $52,000 cash from the issue of common stock.
2. Borrowed $20,000 cash from National Bank.
3. Earned cash revenues of $42,000 for performing services.
4. Paid cash expenses of $23,000.
5. Paid a $6,000 cash dividend to the stockholders.
6. Acquired an additional $10,000 cash from the issue of common stock.
7. Paid $10,000 cash to reduce the principal balance of the bank note.
8. Paid $45,000 cash to purchase land.
9. Determined that the market value of the land is $55,000.

Required
a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Also, in the Statement of 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. Determine the amount of total assets that Daley would report on the December 31, Year 1, balance sheet.
c. Identify the asset source transactions and related amounts for Year 1.
d. Determine the net income that Daley would report on the Year 1 income statement. Explain why dividends do not appear on the income statement.
e. Determine the net cash flows from operating activities, financing activities, and investing activities that Daley would report on the Year 1 statement of cash flows.
f. Determine the percentage of assets provided by investors, creditors, and earnings.
g. What is the balance in the Retained Earnings account immediately after Event 3 is recorded?

Transcribed Image Text:

Balance Sheet Income Statement Statement of Cash Flows Llab. Assets Stk. Equity Rev. - Exp. = Net Inc. Event Notes Pay. + Cash + Land = 52,000 + Com. Stk. + Ret. Earn. 1. NA NA NA NA 52,000 NA NA 52,000 FA