E1.

4 (LO 3) Consider the following business activities.

Instructions:
1. For each of the above items, indicate the type of business activity—operating (O), investing (I), or fina
2. Indicate whether each of the above items would increase (+) or decrease (−) cash. Assume all items

Type of Activity
1 Purchase of goods for resale Operating
2 Issue of common shares Financing
3 Sale of equipment that the company has finished using Investing

4 Receipt of bank loan Financing

5 Purchase of long-term investment Investing
6 Purchase of equipment Investing
7 Sale of merchandise to customers Operating
8 Payment of salaries to employees Operating
9 Sale of long-term investment Investing
10 Repayment of loan owed to bank Investing
11 Payment of dividends Financing
12 Payment of interest on money borrowed from bank Operating
 erating (O), investing (I), or financing (F).
ase (−) cash. Assume all items are cash transactions. The first one has been done for you as an example.

Cash Effect Operating

Decrease (-) Investing
Increase (+) Financing
Increase (+)
Increase (+)
Increase (+) Decrease (-)
Decrease (-)
Decrease (-)
Increase (+)
Decrease (-)
Increase (+)
Decrease (-)
Decrease (-)
Decrease (-)
Operating

Financing

Increase (+)
Decrease (-)
E1.5 (LO 4) Consider the following typical accounts and statement items.

Instructions
Indicate on which statement(s)—statement of income (SI), statement of financial position (SFP), statement
(SCF)—you would find each of the above accounts or items. Note that there may be more than one correc

Statement (1)
1. Interest income SI - Statement of Income
2. Cash SCF - Statement of Cash Flows
3. Cash provided by operating activitie SCF - Statement of Cash Flows
4. Service revenue SI - Statement of Income
5. Common shares SCE - Statement of Changes in Equity
6. Dividends declared SCE - Statement of Changes in Equity
7. Net income SI - Statement of Income
8. Accounts receivable SFP - Statement of Financial Position
9. Inventory SFP - Statement of Financial Position
10. Income tax expense SI - Statement of Income
11. Interest expense SI - Statement of Income
12. Cash used by investing activities SCF - Statement of Cash Flows
13. Equipment SFP - Statement of Financial Position
14. Retained earnings SFP - Statement of Financial Position
15. Bank loan payable SFP - Statement of Financial Position
ancial position (SFP), statement of changes in equity (SCE), and/or statement of cash flows
e may be more than one correct statement for some of the above.

Statement (2) if applicable

SI - Statement of Income
SFP - Statement of Financial Position SFP - Statement of Financial Position
SCE - Statement of Changes in Equity
SCF - Statement of Cash Flows
SFP - Statement of Financial Position

SCE - Statement of Changes in Equity

SCE - Statement of Changes in Equity

ement of Income
atement of Financial Position
atement of Changes in Equity
atement of Cash Flows
E1.7 (LO 4) Summaries of selected data from the financial statements of two corporations follow. B

Instructions
Determine the missing amounts for [1] to [12]. Note that you may not be able to solve the items in numerica

Lumber Inc.
Statement of income
Total revenues $1,000,000
Total expenses $850,000
Net income 150,000
Statement of changes in equity
Total shareholders’ equity, beginning of year 0
Common shares, beginning of year 0
Issue of shares 100,000
Common shares, end of year 100,000
Retained earnings, beginning of year 0
Net income 150,000
Dividends declared 50,000
Retained earnings, end of year 100,000
Total shareholders’ equity, end of year 200,000
Statement of financial position
Total assets 1,050,000
Total liabilities 850,000
Total shareholders’ equity 200,000
tatements of two corporations follow. Both companies have just completed their first year of operations.

y not be able to solve the items in numerical order.

Trucking Inc.

300,000
250,000
50,000

0
0
20,000
20,000
0
50,000
10,000
40,000
60,000

210,000
150,000
60,000
ear of operations.