Indicate the effects of each of these transactions upon the following elements of the company’s financial statements. Organize your answer in tabular form, using the column headings shown below. Use the following code letters to indicate the effects of each transaction on the accounting elements listed in the column headings: I for increase, D for decrease, and NE for no effect.
Fifteen transactions or events affecting Westmar, Inc., are as follows:
a. Made a year-end
stated separately from the principal amount.
b. A liability classified for several years as long-term becomes due within the next 12 months.
c. Recorded the regular weekly payroll, including payroll taxes, amounts withheld from employ-
ees, and the issuance of paychecks.
d. Earned an amount previously recorded as unearned revenue.
e. Made arrangements to extend a bank loan due in 60 days for another 36 months.
f. Made a monthly payment on a fully amortizing installment note payable. (Assume this note is
classified as a current liability.)
g. Called bonds payable due in 10 years at a price below the carrying value of the liability in the
accounting records.
h. Issued bonds payable at 101 on January 31, 2011. The bonds pay interest on January 31 and
July 31.
i. Recorded July 31, 2011, interest expense and made semiannual interest payment on bonds
referred to in part h.
j. Recorded necessary adjusting entry on December 31, 2011, for bonds referred to in part h.
k. Issued bonds payable at 98 on August 31, 2011. The bonds pay interest August 31 and
February 28.
l. Recorded the necessary adjusting entry on December 31, 2011, for bonds referred to in part k.
m. Recorded an estimated liability for warranty claims.
n. Entered into a five-year commitment to buy all supplies from a particular supplier at a price
20 percent below market.
o. Received notice that a lawsuit has been filed against the company for $8 million. The amount
of the company’s liability, if any, cannot be reasonably estimated at this time.
Instructions
Indicate the effects of each of these transactions upon the following elements of the company’s
financial statements. Organize your answer in tabular form, using the column headings shown
below. Use the following code letters to indicate the effects of each transaction on the accounting
elements listed in the column headings: I for increase, D for decrease, and NE for no effect.
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