Applying Financial Statement Linkages to Understand Transactions

Consider the effects of the independent transactions, a through g, on a company's balance sheet, income statement, and statement of cash flows. Complete the table below to explain the effects and financial statement linkages. Refer to Exhibit 2.10 as a guide for the linkages.

a. Owners invested cash in the company in exchange for shares of common stock.

b. The company received cash from the bank for a loan.

c. The company purchased equipment to manufacture goods for sale and paid with cash.

d. The company manufactured a custom piece of inventory and paid cash for materials and labor. The company sold the inventory for more than cost, and the customer promised to pay for the inventory in 30 days.

e. The company paid monthly rent for a manufacturing space.

f. The company paid cash dividends to the owners.

g. The company received cash from the customer in transaction d.

To indicate the account increases (+), enter "1" in the answer box.

To indicate the account decreases (-), enter "2" in the answer box.

Leave other answers boxes blank, if the account is not impacted by the transaction.