Financing

Braxton Corp. was organized on January 1, 2012, to operate a limousines service to and from

the airport. For each of the following business activities, indicate whether it is a financing (F),

investing (I), or operating (O) activity.

F 1. Issued shares of stock to each of the four owners.

I 2. Purchased two limousines.

O 3. Paid first month’s rent for use of garage.

F 4. Obtained loan from local bank.

O 5. Received cash from customer for trip to the airport.

O 6. Paid driver first week’s wages.

I 7. Purchased 500-gallon fuel tank.

The following basic accounting principles and assumptions were discussed in the chapter:

Economic entity

Monetary unit

Cost principle

Going concern

Time period

Fill in each of the blanks with the accounting principle or assumption that is relevant to the

situation described.

Economic entity 1. Genesis Corporation is now in its 30th year of

business. The founder of the company is planning to

retire at the end of the year and turn the business

over to his daughter.

Cost principle 2. Nordic Company purchased a 20-acre parcel of

property on which to build a new factory. The

company recorded the property on the records at

the amount of cash given to acquire it.

Monetary unit 3. Jim Bailey enters into an agreement to operate a

new law firm in partnership with a friend. Each

partner will make an initial cash investment of

$10,000. Jim opens a checking account in the name

of the partnership and transfers $10,000 from his

personal account into the new account.

Going concern 4. Multinational Corp. has a division in Japan. Prior to

preparing the financial statements for the company

and all of its foreign divisions, Multinational

translates the financial statements of its Japanese

division from yen to U.S. dollars.

Time period 5. Camden Company has always prepared financial

statements annually, with a year-end of June 30.

Because the company is...