Determining Financial Statement Effects of Various Transactions and Identifying Cash Flow Effects
Big Dog Holdings, Inc., is the parent company of Big Dog USA, a company that develops, markets, and retails a collection of consumer products centered around the signature BIG DOGS name, logo, and âBig Dogâ characters. The following activities were inferred from a recent annual report.
a. Example: Incurred expenses; paid part in cash and part on credit.
b. Paid interest on long-term debt.
c. Sold merchandise to customers on account.
d. Sold investments for cash for more than their cost.
e. Collected cash on account.
f. Used supplies.
g. Repaid long-term debt principal.
h. Received dividends and interest on investments.
i. Purchased equipment; paid part in cash and part on credit.
j. Paid cash on account.
k. Issued additional stock.
l. Paid rent to outlet mall owners.
1. For each of the transactions, complete the tabulation, indicating the effect (+ for increase and â for decrease) of each transaction. (Remember that A = L + SE, R â E = NI, and NI affects SE through Retained Earnings.) Write NE if there is no effect. The first transaction is provided as an example.
2. For each transaction, indicate where, if at all, it would be reported on the statement of cash flows. Use O for operating activities, I for investing activities, F for financing activities, and NE if the transaction would not be included on thestatement.