58 Chapter 2 Basic Accounting Concepts
Balance Sheet
Assets Liabilities Stockholders’ Equity
Cash Notes Payable Capital Stock
6,000 6,000
10,000 10,000
16,000 10,000 6,000Statement of Cash Flows
b. Financing 10,000Statement of
Cash FlowsIncome
StatementBalances
b. Loan from bank
BalancesTransaction c. Next, Family Health Care buys land for $12,000 cash. The land is
located near a new suburban hospital that is under construction. Lee Landry plans to
rent office space and equipment for several months. When the hospital is completed,
Family Health Care will build on the land.
The effect of this transaction is an outflow of cash as an investing activity. Thus, a
negative $12,000 is entered in the statement of cash flows column as an investing ac-
tivity. On the balance sheet, the purchase of the land changes the makeup of the as-
sets, but it does not change the total assets. That is, cash is decreased and land is
increased by $12,000. The effect of this transaction on Family Health Care’s financial
statements is shown below:A History of Ethical Conduct
The Wrigley Companyhas a long history of integrity, ob-
jectivity, and ethical conduct. When pressured to become part
of a cartel, known as the Chewing Gum Trust, the company
founder, William Wrigley Jr., said, “We prefer to do business
by fair and square methods or we prefer not to do business at
all.” In 1932, Phillip K. Wrigley, called “PK” by his friends,
became president of the Wrigley Company after his father,
William Wrigley Jr., died. PK also was president of the Chicago
Cubs, which played in Wrigley Field. He was financiallygenerous to his players and frequently gave them advice on
and off the field. However, as a man of integrity and high eth-
ical standards, PK docked (reduced) his salary as president of
the Wrigley Company for the time he spent working on Cubs
related activities and business.Source:St. Louis Post-Dispatch, “Sports—Backpages,” January 26,
2003.INTEGRITY, OBJECTIVITY, AND ETHICS IN BUSINESS
Balance Sheet
Assets Liabilities Stockholders’ Equity
Cash Land Notes Payable Capital Stock
16,000 10,000 6,000
12,000 12,000
4,000 12,000 10,000 6,000Statement of Cash Flows
c. Investing 12,000Statement of
Cash FlowsIncome
StatementBalances
c. Purchase of land
Balances