The following is a list of transactions entered into by Kaitland Manufacturing during 2015: 1. Recorded depreciation

Question:

The following is a list of transactions entered into by Kaitland Manufacturing during 2015:

1. Recorded depreciation expense of $170,000.

2. Sold 10,000 shares of common stock ($10 par value) for $18 per share.

3. Purchased 5,000 shares of IBM for $75 per share.

4. Purchased a three-year insurance policy for $27,000.

5. Purchased a building with a fair market value of $200,000 in exchange for a twenty-five-year mortgage. The agreement called for a down payment of $40,000.

Assume that each transaction is independent. Indicate how each transaction affects the accounting equation and how the cash effect, if any, would be disclosed on the company’s statement of cash flows. That is, provide

a. The dollar amount of the cash effect,

b. Whether it increases or decreases cash, and

c. The section of the statement of cash flows in which it would appear.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...