The Ramires, Incorporated experienced the following events during its first year of operations, Year 1:
1. Acquired $56,000 cash by issuing common stock.
2. Earned $52,000 cash revenue.
3. Paid $27,000 cash for operating expenses.
4. Borrowed $15,000 cash from a bank.
5. Paid $40,000 cash to purchase land.
6. Paid a $1,000 cash dividend.

Required
a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. 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 transaction is shown as an example.

b. Prepare a formal income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows.

Transcribed Image Text:

Balance Sheet Statement of Cash Flows Income Statement Liab. Assets Stk. Equity Cash Com. Stk. + Ret. Earn. Net Inc. Exp. Notes Pay. + Event Rev. + Land 1. NA NA NA 56,000 + 56,000 NA NA NA 56,000 FA %3D