Exercise 9-2A (Algo) Effects of recognizing accrued interest on financial statements LO 9-1 Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $1,100 of cash revenue. 2. Borrowed $2,500 cash from the bank. 3. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, Issued on September 1, Year 1, had a one-year term and an 4 percent annual interest rate. Required a. What is the amount of Interest payable at December 31, Year 1? b. What is the amount of Interest expense in Year 1? c. What Is the amount of Interest paid in Year 1? d. 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 (1) or decreases (D) each element of the financial statements. In the Statement of Cash Flows column, classify the cash flows as operating activities (OA), Investing activities (IA) or financing activities (FA). Columns for events that have no effect on any of the elements should be left blank. The first transaction has been recorded as an example. Complete this question by entering your answers in the tabs below. Reg A to C Req D What is the amount of interest payable at December 31, Year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. What is the amount of interest expense in Year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. What is the amount of interest paid in Year 1? a. Interest payable b. Interest expense зе c. Amount of cash paid Req D> Show less
Exercise 9-2A (Algo) Effects of recognizing accrued interest on financial statements LO 9-1 Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $1,100 of cash revenue. 2. Borrowed $2,500 cash from the bank. 3. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, Issued on September 1, Year 1, had a one-year term and an 4 percent annual interest rate. Required a. What is the amount of Interest payable at December 31, Year 1? b. What is the amount of Interest expense in Year 1? c. What Is the amount of Interest paid in Year 1? d. 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 (1) or decreases (D) each element of the financial statements. In the Statement of Cash Flows column, classify the cash flows as operating activities (OA), Investing activities (IA) or financing activities (FA). Columns for events that have no effect on any of the elements should be left blank. The first transaction has been recorded as an example. Complete this question by entering your answers in the tabs below. Reg A to C Req D What is the amount of interest payable at December 31, Year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. What is the amount of interest expense in Year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. What is the amount of interest paid in Year 1? a. Interest payable b. Interest expense зе c. Amount of cash paid Req D> Show less
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 9-2A (Algo) Effects of recognizing accrued interest on financial statements LO 9-1
Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of
operation:
1. Earned $1,100 of cash revenue.
2. Borrowed $2,500 cash from the bank.
3. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, Issued on September 1, Year 1,
had a one-year term and an 4 percent annual interest rate.
Required
a. What is the amount of Interest payable at December 31, Year 1?
b. What is the amount of Interest expense in Year 1?
c. What Is the amount of Interest paid in Year 1?
d. 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 (1) or decreases (D) each element of the financial statements. In the Statement of Cash
Flows column, classify the cash flows as operating activities (OA), Investing activities (IA) or financing activities (FA). Columns for
events that have no effect on any of the elements should be left blank. The first transaction has been recorded as an example.
Complete this question by entering your answers in the tabs below.
Reg A to C
Req D
What is the amount of interest payable at December 31, Year 1?
Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount.
What is the amount of interest expense in Year 1?
Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount.
What is the amount of interest paid in Year 1?
a. Interest payable
b. Interest expense
зе
c. Amount of cash paid
Req D>
Show less
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