1. Determining Financial Statement. Effects of Various. Transactions and
Determining Financial Statement Effects of Various Transactions and Identifying Cash Flow Effects
P3-3
Group 3

2. Prompt:
According to its annual report, Wendy’s International serves “the best hamburgers in the business” and other fresh food including salads, chicken sandwiches, and baked potatoes in more than 6,400 restaurants worldwide. The company operates its own restaurants and sells franchises to others. The following activities were inferred from a recent annual report.

3. Questions
For each of the transactions, complete the tabulation, indicating the effect (+ for increase and – for decrease) of each transaction. (Remember that A=L+SE, R-E=NI, and NI affects SE through Retained Earnings.) Write NE if there is no effect.
Where, if at all, would each transaction be reported on the statement of cash flows? Use O for operating activates, I for investing activities, F for financing activities, and NE if the transaction would not be included on the statement.

4. A. Purchased additional investments.
Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income
+/- NE
Investing activity

5. B. Served food to customers for cash.
Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income + NE
Operating activity

6. C. Used food and paper products.
Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income - NE +
No effect

7. D. Paid Cash Dividends - NE Financing activity Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income - NE
Financing activity

8. E. Incurred restaurant operating costs in company-owned facilities:
E. Incurred restaurant operating costs in company-owned facilities: paid part in cash and the rest on account.
Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income - + NE
Operating activity

9. F. Sold franchises, receiving part in cash and the rest in notes due from franchises.
Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income + NE
Operating activity

10. G. Paid interest on debt - NE + Operating activity Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income - NE +
Operating activity

11. H. Purchased food and paper products;
H. Purchased food and paper products; paid part in cash and the rest on account.
Balance Sheet
Income Statement
Assets
Liabilities
Stockholder’s Equity
Revenues
Expenses
Net Income
+/- + NE
Operating activity