Question: Peter loves dogs and cats. For the past several years, he has owned and operated Homeward Bound, which temporarily houses pets while their owners go on vacation. For the month of June, the company has the following transactions:
June 2 Obtain cash by borrowing $20,000 from the bank by signing a note.
June 3 Pay rent for the current month, $1,000.
June 7 Provide services to customers, $4,200 for cash and $2,500 on account.
June 11 Purchase cages and equipment necessary to maintain the animals, $7,400 cash.
June 17 Pay employees' salaries for the first half of the month, $5,500.
June 22 Pay dividends to stockholders, $1,300.
June 25 Receive cash in advance from a customer who wants to house his two dogs (Chance and Shadow) and cat (Sassy) while he goes on vacation the month of July, $1,600.
June 28 Pay utilities for the month, $2,300.
June 30 Record salaries earned by employees for the second half of the month, $5,500. Payment will be made on July 2.
Required: 1. Record each transaction.
2. Identify the transactions involving cash.
3. Assuming the balance of cash at the beginning of June is $13,700, post each cash transaction to the Cash T-account and compute the ending cash balance.
4. Prepare a statement of cash flows for the month of June, properly classifying each of the cash transactions into operating, investing, and financing activities.
5. Verify that the net cash flows reported in the statement of cash flows equal the change in the cash balance for the month.