Chrome File Edit View History Bookmarks People Window Help G -55% L-Tue 7:39 PM

ID: 2548034 • Letter: C

Question

Chrome File Edit View History Bookmarks People Window Help G -55% L-Tue 7:39 PM Ayah Mansour E Inbox (60 c eill y Started Dar Secure https:newconnect.mheducation.com/flow/connect.html a t Google N Netflix 1 The Sociological NBA.com @ Home GradesFirst E ESPN: The World IRIT Online Main Blackboard Home Chegg.com . Target * BenefitHub D Nike Women's Spor » exercise 7-2 6 Help Save & Et Submit Check my work Bill Darby started Darby Company on Januery 1, 2018. The company experienced the following events during its first year af operetionn Eaned $1,100 of cash revenue. 2. Bcrrowed $2,000 cesh from the bank. 3. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on September 1, 2018, 10 had a one-year term and an 9 percent annual interest rate. Required a What is the amaunt of interest b. What amount of cash was paid for interest in 2018? c. Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash expense in 20187 flows. Indicate whether the event increases 41. decreases(D), or does not affect (NA) each element of the financial statements. In the Cesh Flows column, designate the cash flows as operating activities (OA), investing activities (A), or financing activities IFA. The first transaction has been recorded as an example. Complete this question by entering your answers in the tabs below. Req A and BRq C Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (I), decreases (D), or does rot affec (NA) each element of the financial statements. In the Cash Flows column, des gnate the cash flews as operating activities (CA), investing actimties (IA), or financing activities (FA). The first transaction has been recorded as an example. Horizontal Statements Modal Balance Sheet Income Seadement +Blockholders' Equity Staterment of Cash Flows No. IntomonRd Revnue Expenses CashNotee Roq Aand B Prey 1 at 1 Next > 20

Explanation / Answer

Answer

Amount borrowed

$2000

Interest rate

$9%

12 months Interest [2000 x 9%]

$180

Interest for 4 months [Sept to Dec 31] [180 x 4months/12months]

$60

Amount of interest expense in 2018 for 4 months [ from 1 Sept to 31 Dec] will be $60

Amount of cash paid for interest in 2018 is ‘’Zero”. No actual cash is paid, interest expense is hence ‘’accrued’’ only.

Event No

Balance Sheet

Income Statement

Statement of cash Flows

Assets =

Liabilities +

Stockholder's Equity

Revenue

Expenses

Net Income

Cash

Notes Payable

Interest payable

Common Stock

Retained Earnings

I $1100

I $2000

I $60

D $60