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# Cash flow effects of changes in equity accounts

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The following account balances relate to the stockholders' equity accounts of Gore Corp. at year-end.

2008 2007
Common stock, 10,500 and 10,000 shares, respectively, for 2008 and 2007 \$160,000 \$140,000
Preferred stock, 5,000 shares 125,000 125,000
Retained earnings 300,000 260,000

A small stock dividend was declared and issued in 2008. The market value of the shares was \$10,500. Cash dividends were \$15,000 in both 2008 and 2007. The common stock has no par or stated value.
Hint:
Determine cash flow effects of changes in equity accounts.

Instructions
(a) What was the amount of net income reported by Gore Corp. in 2008?

(b) Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2008.
(c) Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.

https://brainmass.com/economics/income-distribution/cash-flow-effects-of-changes-in-equity-accounts-286983

#### Solution Summary

The solution explains how to calculate the cash flow effects of changes in equity accounts

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## 8 Accounting Questions: Classification of transactions by account type

Please see the attached excel file. There are 8 multiple choice questions.

1. HIJ Company paid \$500 cash for salary expenses. Which of the following choices accurately reflects how this event would affect the company's financial statements?

Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
A) NA = 500 + -500 NA - 500 = -500 NA
B) -500 = NA + -500 NA - 500 = -500 (500) OA
C) -500 = NA + -500 NA - NA = NA (500) OA
D) -500 = NA + -500 NA - 500 = -500 (500) IA

A Above
B Above
C Above
D Above

2. RST Company experienced an accounting event that affected its financial statements as indicated below:

Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
- NA - NA NA NA _-FA

Which of the following accounting events could have caused these effects on RST statements?
A paid a cash dividend
B earned a cash dividend
C borrowed money from a bank
D none of the above

3. Which of the following could describe the effects of an asset source transaction on a company's financial statements?

Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
A) - = NA + - NA - NA = NA _-OA
B) - = + NA NA - - = _-IA
C) + = NA + - - - NA = - _-OA
D) None of the above could represent the effects of an asset source transaction.

A Above
B Above
C Above
D Above

4. ABC Company acquired \$23,000 by issuing common stock to investors. Which of the following choices accurately reflects how this event would affect the company's financial statement?

Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
A) - = NA + - NA - NA = NA _-OA
B) - = - + NA NA - - = _-IA
C) + = NA + - - - NA = - _-OA
D) None of the above could represent the effects of an asset source transaction.

A Above
B Above
C Above
D Above

5. Osborn Company provided services to a customer on account. Which of the following represents the effect of this transaction on the financial statements?

Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
A) + = + + NA + - NA = + _+OA
B) Na = + + - + - NA = + NA
C) + = NA + + + - NA = + _+ OA
D) + = NA + + + - NA = + NA

A Above
B Above
C Above
D Above

6. The KMR Company recorded salaries earned by employees but not yet paid. Which of the following represents the effect of this transaction on the financial statements?

Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
A) + = + + NA + - NA = + _-OA
B) NA = + + - NA - + = - _-OA
C) - = NA + - NA - + = - NA
D) NA = - + - NA - + = - NA

A Above
B Above
C Above
D Above

7. The following selected account balances were drawn from the 2007 balance sheet and income statement of Persimmon Company:

Cash 2800 Common Stock ?
Accounts Receivable 750 2600
Accounts Payable 500 Revenues 5400
Land 600 Expenses 4000

Based on the above information, what is the balance of Common Stock for Persimmon Company?

A) \$750
B) \$1050
C) \$1550
D) \$2050

8.) The following accounts and balances were drawn from the records of Thatcher Company on December 31, 2006:

Cash 1000 Accnt Receivable 850
Accounts Receivable 500 Common Stock 975
Accounts Payable 800 Revenues 800
Land 450 Expenses 250

Total assets on the December 31, 2006 balance sheet would amount to

A) \$3150
B) \$3450
C) \$1800
D) \$2650

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