Show the effect of each of the following independent accounting events on the fi

Question

Show the effect of each of the following independent accounting events on the financial statements using a horizontal statements model like the following one. Use + for increase, for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA) and a financing activity (FA). The letters NA indicate that an element is not affected by the event. The first event is recorded as an example.

a. Borrowed funds using a line of credit.

b. Made an interest payment for funds that had been borrowed against a line of credit.

c. Issued a bond at face value.

d. Made an interest payment on a bond that had been issued at face value.

e. Made a cash payment on a note payable for both interest and principal.

Explanation / Answer

Borrowed funds using a line of credit. + FA interest payment for funds - OA Issued a bond at face value + FA interest payment on a bond - OA cash payment on a note payable for principal - FA cash payment on a note payable for Interest - OA

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