Question

E12.3 (LO 1), AP Cushenberry Corporation had the following transactions. Prepare journal entry and determine effect on cash flows. 1. Sold land (cost $12,000) for $15,000. 2. Issued common stock at par for $20,000. 3. Recorded depreciation on buildings for $17,000. 4. Paid salaries of $9,000. 5. Issued 1,000 shares of $1 par value common stock for equipment worth $8,000. 6. Sold equipment (cost $10,000, accumulated depreciation $7,000) for $1,200.

Answer 1

Transaction 1

Cash $15,000 (debit)

Profit and Loss $ 3,000 (credit)

Land $12,000 (credit)

Cash Flow Effect : Increase $15,000

Transaction 2

Cash $20,000 (debit)

Common Stock $20,000 (credit)

Cash Flow Effect : Increase $20,000

Transaction 3

Depreciation Expense $17,000 (debit)

Accumulated Depreciation Expense $17,000 (credit)

Cash Flow Effect : No Change

Transaction 4

Salaries Expenses $9,000 (debit)

Cash $9,000 (credit)

Cash Flow Effect : Decrease $9,000

Transaction 5

Equipment $8,000 (debit)

Common Stock $1,000 (credit)

Paid In Excess of Par $7,000 (credit)

Cash Flow Effect : No Change

Transaction 6

Cash $1,200 (debit)

Accumulated Depreciation $7,000 (debit)

Profit and Loss $1,800 (debit)

Equipment at Cost $10,000 (credit)

Cash Flow Effect : Increase $1,200

Step-by-step explanation:

All Cash transactions will have an effect on cash flow. Non Cash transactions will not have an effect and these include exchanges of assets and other financial instruments.