Hayes Consulting Services experienced the following events during 2006.

1. Acquired cash by issuing common stock.

2. Collected cash for providing tutoring services to clients.

3. Borrowed cash from a local government small business foundation.

4. Purchased land for cash.

5. Paid cash for operating expenses.

6. Paid a cash dividend to the stockholders.

7. Determined the year-end market value of the land to be higher than its historical cost.

Required:

Use a horizontal 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 element of the financial statements. Also, in the 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.

Transcribed Image Text:

Balance Sheet Income Statement Event Statement of No. Cash + Land = N. Pay. + Com. Stk. + Ret. Earn. Rev. - Exp. = Net Inc. Cash Flows 1. NA NA NA NA - NA === NA FA