Consider the effects of the independent transactions, a through g, on a company’s balance sheet, income statement, and statement of cash flows.

Applying Financial Statement Linkages to Understand Transactions

Complete the table below to explain the effects and financial statement linkages. Refer to Exhibit 2.10 as a guide for the linkages.

a. The company issued common stock in exhange for cash and property and equipment.

b. The company paid cash for rent of office furnishings and facilities.

c. The company performed services for clients and immediately received cash earned.

d. The company performed services for clients and sent a bill with payment due within 60 days.

e. The company compensated an office employee with cash as salary.

f. The company received cash as partial payment on the amount owed from clients in transaction d.

g. The company paid cash in dividends.

To indicate the account increases (+), enter “1” in the answer box.

To indicate the account decreases (-), enter “2” in the answer box.

Leave other answers boxes blank, if the account is not impacted by the transaction.

a.b.c.

Balance sheet

CashAnswer

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Noncash assetsAnswer

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Total liabilitiesAnswer

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Contributed capitalAnswer

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Retained earningsAnswer

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Other equityAnswer

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Statement of cash flowsOperating cash flowAnswer

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Investing cash flowAnswer

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Financing cash flowAnswer

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Income statementRevenuesAnswer

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ExpensesAnswer

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Net incomeAnswer

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Statement of stockholders’ equityContributed capitalAnswer

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Retained earningsAnswer

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