The Candle Shop experienced the following events during its first year of operations, 2018:

1. Acquired cash by issuing common stock.

2. Paid a cash dividend to the stockholders.

3. Paid cash for operating expenses.

4. Borrowed cash from a bank.

5. Provided services and collected cash.

6. Purchased land with cash.

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 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 + C. Stock. + Ret. Ear. Rev. - Exp = Net Inc. Cash Flows +NA = NA + + NA NA NA NA I FA