Rosemont Company began operations on January 1, Year 1, and on that date issued stock for $60,000 cash. In addition, Rosemont borrowed $50,000 cash from the local bank. The company provided services to its customers during Year 1 and received $35,000. It purchased land for $70,000. During the year, it paid $10,000 cash for salaries and $9,000 cash for supplies that were used up in its operations. Stockholders were paid cash dividends of $8,000 during the year.Required:a) List the transactions from the information above (for example, issued common stock for $60,000) and indicate in which section of the statement of cash flows each transaction would be reported.b) What would the amount be for net cash flows from operating activities?c) What would be the end-of-year balance for the cash
account?d) What would be the amount of the total assets for the Rosemont Company at the end of Year 1?e) What would be the end-of-year balance for the retained earnings account?
What will be an ideal response?
a)
| Transaction | Description | Section of statement of cash flows |
| 1 | Issued stock for $60,000 cash | Financing activities |
| 2 | Borrowed $50,000 cash from bank | Financing activities |
| 3 | Provided services to customers, $35,000 | Operating activities |
| 4 | Purchased land for $70,000 | Investing activities |
| 5 | Paid cash for salaries, $10,000 | Operating activities |
| 6 | Paid cash for supplies, $9,000 | Operating activities |
| 7 | Paid cash dividends, $8,000 | Financing activities |
b) Net cash flows from operating activities = $16,000 ($35,000 - 10,000 - 9,000).
c) Cash account balance: $48,000.
d) Total Assets = $118,000 (Cash = $48,000; Land = $70,000)
e) Retained earnings balance: $8,000 ($35,000 - 10,000 - 9,000 - 8,000).
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