Refer to P2-3.

Injection Plastics Company has been operating for three years. At December.31, 2011, the accounting records reflected the following:

During the year 2012, the following summarized transactions were completed:

a. Purchased equipment that cost \(\$ 18,000\); paid \(\$ 6,000\) cash and signed a one-year note for the balance.

b. Issued 2,000 additional shares for \(\$ 12,000\) cash.

c. Lent \(\$ 7,000\) to a supplier who signed a two-year note.

d. Purchased short-term investments for \(\$ 9,000\) in cash.

e. Paid \(\$ 5,000\) on the note in transaction (a).

f. Borrowed \(\$ 12,000\) cash on December 31, 2012, from a local bank and signed a note, payable June \(30,2013\).
g. Purchased a patent (an intangible asset) for \(\$ 3,000\) cash.
h. Built an addition to the factory for \(\$ 25,000\); paid \(\$ 9,000\) in cash and signed a three-year note for the balance.
i. Hired a new president at the end of the year. The contract was for \(\$ 85,000\) per year plus options to purchase company shares at a set price based on company performance.
j. Returned defective equipment to the manufacturer, receiving a cash refund of \(\$ 1,000\).

Required:
Using the transactions

(a) through (j) in P2-3, indicate whether each transaction is an investing (I) or financing (F) activity for the year and the direction of the effect on cash flows ( + for increase and - for decrease). If there is no effect on cash flows, write NE.

Transcribed Image Text:

Cash Investments (short-term) Trade receivables Inventories Notes receivable (long-term) Equipment Factory building $21,000 Intangibles $3,000 2,000 Trade payables 15,000 3,000 Accrued liabilities. 2,000 24,000 Short-term borrowings 7,000 1,000 Notes payable (long-term) 48.000 48,000 Share capital 90,000 90,000 Retained earnings 30.000