Presented below is a list of possible transactions. Analyze the effect of the 18 transactions on the financial statement categories indicated. Transactions Assets Liabilities Owners' Equity Net Income 1. Purchased inventory for $80,000 on account (assume perpetual system is used). Decrease Increase 2. Issued an $80,000 note No net effect payable in payment on account (see item 1 above). 3. Recorded accrued interest on the note from item 2 above. 4. Borrowed $100,000 from the bank by signing a 6- month, $112,000, zero- interest-bearing note. 5. Recognized 4 months' interest expense on the note from item 4 above.
Presented below is a list of possible transactions. Analyze the effect of the 18 transactions on the financial statement categories indicated. Transactions Assets Liabilities Owners' Equity Net Income 1. Purchased inventory for $80,000 on account (assume perpetual system is used). Decrease Increase 2. Issued an $80,000 note No net effect payable in payment on account (see item 1 above). 3. Recorded accrued interest on the note from item 2 above. 4. Borrowed $100,000 from the bank by signing a 6- month, $112,000, zero- interest-bearing note. 5. Recognized 4 months' interest expense on the note from item 4 above.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Presented below is a list of possible transactions.
Analyze the effect of the 18 transactions on the financial statement categories indicated.
Transactions
Assets
Liabilities
Owners' Equity
Net Income
1.
Purchased inventory for
$80,000 on account
(assume perpetual system is
used).
Decrease
Increase
2.
Issued an $80,000 note
No net effect
payable in payment on
account (see item 1 above).
3.
Recorded accrued interest
on the note from item 2
above.
4.
Borrowed $100,000 from
the bank by signing a 6-
month, $112,000, zero-
interest-bearing note.
5.
Recognized 4 months'
interest expense on the
note from item 4 above.
6.
Recorded cash sales of
Transcribed Image Text:$25,000; the difference was
due to various amounts
withheld.
8.
Recorded employer's
payroll taxes.
Decrease
9.
Accrued accumulated
Increase
vacation pay.
No net effect
10.
Recorded an asset
retirement obligation.
11.
Recorded bonuses due to
employees.
12.
Recorded a contingent loss
on a lawsuit that the
company will probably lose.
13.
Accrued warranty expense
(assume expense warranty
approach).
14.
Paid warranty costs that
were accrued in item 13
above.
0000000
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