Exercise 2-2B Types of transactions and the horizontal financial statements model Pet Partners experienced the following events during its first year of operations, Year 1: 1. Acquired cash by issuing common stock. 2. Borrowed cash from a bank. 3. Signed a contract to provide services in the future. 4. Purchased land with cash. 5. Paid cash for operating expenses. 6. Paid a cash dividend to the stockholders. 7. Determined that the market value of the land is higher than the historical cost. Required a. Indicate whether each event is an asset source, use, or exchange transaction. b. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (I), decreases (D), or does not affect (NA) each part of the financial statements 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. Event 1. Assets Balance Sheet Llab. Stk. Equity Cash +Land Notes Pay. + Com. Stk. +Ret. Earn. + NA NA 1+ NA Income Statement Statement of Cash Flows Rev. Exp. = Net Inc. NA NA NA I FA a. 1. Asset source 2. 3. 4. 5. 7. 19 6. b. Pet Partners Horizontal Financial Statements Model for Year 1 Balance Sheet Income Statement Assets Liab. +Stockholders' Equity Revenue Expense Net Inc. Statement of Cash Flows Event Cash +Land Notes Payable + Common Retained Stock +Earnings 1 I + NA NA + 1 + NA NP NA NA NA I FA 234567