Recording events in a horizontal statements model

Cooley Company was started on January 1, 2012, and experienced the following events during its first year of operation.

1. Acquired $30,000 cash from the issue of common stock.

2. Borrowed $40,000 cash from National Bank.

3. Earned cash revenues of $48,000 for performing services.

4. Paid cash expenses of $45,000.

5. Paid a $1,000 cash dividend to the stockholders.

6. Acquired an additional $20,000 cash from the issue of common stock.

7. Paid $10,000 cash to reduce the principal balance of the bank note.

8. Paid $53,000 cash to purchase land.

9. Determined that the market value of the land is $75,000.


a. Record the preceding transactions in the horizontal statements model. Also, in the Cash Flows column, classify the cash fl ows as operating activities (OA), investing activities (IA), or fi nancing activities (FA). The fi rst event is shown as an example.

b. Determine the amount of total assets that Cooley would report on the December 31, 2012, balance sheet.

c. Identify the asset source transactions and related amounts for 2012.

d. Determine the net income that Cooley would report on the 2012 income statement. Explain why dividends do not appear on the income statement.

e. Determine the net cash fl ows from operating activities, fi nancing activities, and investing activities that Cooley would report on the 2012 statement of cash fl ows.

f. Determine the percentage of assets that were provided by investors, creditors, and retained earnings.

g. What is the balance in the Retained Earnings account immediately after Event 3 is recorded?

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