Effects of transactions upon financial measurements Five events relating to liab

Question

Effects of transactions upon financial measurements
Five events relating to liabilities are described below:
a. Recorded a bi-weekly payroll, including the issuance of paychecks to employees. Amounts withheld from employees' pay and payroll taxes will be forwarded to appropriate agencies in the near future. (Ignore post-retirement costs.)
b. Made a monthly payment on a 12-month installment note payable, including interest and a partial repayment of the principal amount.
c. Shortly before the maturity date of a six-month bank loan, made arrangements with the bank to refinance the loan on a long-term basis.
d. Made an adjusting entry to record accrued interest payable on a 2-year bank loan. (Interest is paid quarterly.)
e. Made a year-end adjusting entry to amortize a portion of the discount on long-term bonds payable.
Indicate the immediate effects of each transaction or adjusting entry upon the financial measurements in the five column headings listed below. Use the code letters, I for increase, D for decrease, and NE for no effect.

Explanation / Answer

ANSWER:

Transaction Current Liability Long term liability Net Income Net cash flow Net cash flow All actvities combined (Other than operating activities) a Increase No effect Decrease Decrease No effect b Decrease No effect Decrease Decrease Decrease c Decrease Increase No effect No effect No effect d Increase No effect Decrease No effect No effect e No effect Increase Decrease No effect No effect

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