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Question 1: 50 points Elnora Comstock, president of Limberlost Incorporated (LI), rushed into your office bright and early this morning. Last night, while dining at the Tower Club with a few business acquaintances, the conversation turned to a discussion of the implications of business transactions on the financial reports. Not knowing much about the "numbers end of the business, she kept her mouth closed and her ears open. Now she is relying on your expertise to bring her up to speed. Limberlost primary business lines include sales of eco-friendly travel tours to exctic locations and the manufacture and sale of pre-packaged organic multi-course meals. 1. Please analyze and record the following selected economic events for the first month of opertaion using the accrual method of accounting in the matrix below. Make sure to indicate if the event is an Operating (O), Investing (I), or Financing (F) activity. 2. In the last column, mark an "X" if the economic event would be recorded differently under the cash method of accounting. Date Event Type Assets Liabilities + Owners' Equity Cash method Net Income (i.e., RE) Cash Acots Reo Other Notes Pay Other Cont. Cap. Rev. or (Exp) "X" if different 1.1.2012 L imberlost Incorporated (RI) sels shares of stock for $50,000 1.1.2012 Limberlost Incorporated (RI) borrows $20,000 from the bank. 1.1.2012 LI purchases office equipment for $7 ,000 on account 1.2012 LI purchases marketable securities for $6,000 in cash. 1-1/30/2012 LI sells 100 meals for $10,000 on account (credit). The meals cost $3,000 to manufacture. 15.1.2012 LI pays salaries of $5,000 in cash. 15. 2012 A customer pays off his outstanding account of $800. 31.1.2012 LI records depreciation on office equipment of 31.1 2012 LI records interest incurred on the loan borrowed from the bank. SAMPLI 31.1.2012 LI pays $5,000 in cash for rent on its off ice space at the time the rent is incurred o (5 .000) (5.000)

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