Marquis Smith started IT Consulting Services Incorporated on January 1, Year 1. The company experienced the following events during its first year of operation: 1. On June 1, Year 1, the company borrowed $21,600 cash from the bank. The note had a one-year term and 6% annual interest rate. 2. On December 31, Year 1, the company adjusted the accounting records to recognize accrued interest expense on the bank note. Required: Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed. Event Number Assets Cash 1. 2. Total "NC= Net change in cash 0=1 0 = Notes Payable Balance Sheet Liabilities 0 + 0+ Interest Payable 0+ + 0 + Stockholders' Equity Common Retained Stock Earnings 0 0 0+ 0 0 Income Statement Revenue - Expenses = Net Income 0 0 0- 0 0 = 0 0 Statement of Cash Flows 0 0 FA NC
Marquis Smith started IT Consulting Services Incorporated on January 1, Year 1. The company experienced the following events during its first year of operation: 1. On June 1, Year 1, the company borrowed $21,600 cash from the bank. The note had a one-year term and 6% annual interest rate. 2. On December 31, Year 1, the company adjusted the accounting records to recognize accrued interest expense on the bank note. Required: Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed. Event Number Assets Cash 1. 2. Total "NC= Net change in cash 0=1 0 = Notes Payable Balance Sheet Liabilities 0 + 0+ Interest Payable 0+ + 0 + Stockholders' Equity Common Retained Stock Earnings 0 0 0+ 0 0 Income Statement Revenue - Expenses = Net Income 0 0 0- 0 0 = 0 0 Statement of Cash Flows 0 0 FA NC
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Marquis Smith started IT Consulting Services Incorporated on January 1, Year 1. The company experienced the following events during
its first year of operation:
1. On June 1, Year 1, the company borrowed $21,600 cash from the bank. The note had a one-year term and 6% annual interest rate.
2. On December 31, Year 1, the company adjusted the accounting records to recognize accrued interest expense on the bank note.
Required:
Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of
cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify
the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA).
Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed.
Event Number
Assets
Cash
1.
2.
Total
"NC= Net change in cash
=
0 =
0 =
Notes
Payable
Liabilities
+
Balance Sheet
0+
0 +
Interest
Payable
+
0 +
+
0 +
Stockholders' Equity
Retained
Earnings
Common
Stock
+
0 +
0+
0+
0
0
Income Statement
Revenue - Expenses = Net Income
0
0
0
-
0 =
=
0 =
0
0
Statement of Cash
Flows
0
0
FA
NC
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