The following selected transactions were taken from the books of Ripley Company for Year 1:1. On February 1, Year 1, borrowed $70,000 cash from the local bank. The note had a 6 percent interest rate and was due on June 1,Year 1.2. Cash sales for the year amounted to $240,000 plus sales tax at the rate of 7 percent.3. Ripley provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 1 percent of sales.4. Paid the sales tax to the state sales tax agency on $210,000 of the sales.5. Paid the note due on June 1 and the related interest.6. On November 1, Year 1, borrowed $20,000 cash from the local bank. The note had a 6 percent interest rate and a one-year term tomaturity7. Paid $2.100 in warranty repairs.8. A customer has filed a lawsuit against Ripley for $1 million for breach of contract. The company attorney does not believe the suithas merit.Requireda. Answer the following questions:1. What amount of cash did Ripley pay for interest during Year 1?2. What amount of interest expense is reported on Ripley's income statement for Year 1?3. What is the amount of warranty expense for Year 1?b. Post the liabilities transactions to T-accounts and prepare the current liabilities section of the balance sheet at December 31, Year 1.c. Show the effect of these transactions on the financial statements using a horizontal statements model like the one shown here. Use+ for increase, - for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA),investing activity (IA), or financing activity (FA). or not affected (NA). The first transaction has been recorded as an example.Complete this question by entering your answers in the tabs below.Required B1 T Required B2Bal SheetRequired A1Required A2Required A3Required CAccountShow the effect of these transactions on the financial statements using a horizontal statements model like the one shown here. Use + for increase, -decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financine(FA), or not affected (NA). The first transaction has been recorded as an example.SheComplete this question by entering your answers in the tabs below.Required B1 TAccountRequired B2Bal SheetRequired A1Required A2Required A3Required CShow the effect of these transactions on the financial statements using a horizontal statements model like the one shown here.decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing a(FA), or not affected (NA). The first transaction has been recorded as an example.EventAssets= LiabilitiesEquityRevenueExpense = Net IncomeCash Flow+1.NANANANAFA2.3.4.%3D5.%3D6.7.NA< Required B2 Bal SheetRequired C>Complete this question by entering your answers in the tabs below.Required B1 T Required B2Bal SheetRequired A1Required A2Required A3Required CAccountPrepare the current liabilities section of the balance sheet at December 31, Year 1.RIPLEY COMPANYBalance Sheet (partial)As of December 31, Year 1Current liabilitiesTotal current liabilities24Required B1 T AccountRequired C >Complete this question by entering your answers in the tabs below.Required B1 T Required B2Bal SheetRequired A1Required A2Required A3Required CAccountPost the liabilities transactions to T-accounts at December 31, Year 1.Interest PayableSales Tax PayableBeg. Bal.Beg. Bl.End. Bal.End. Bal.Warranty PayableNotes PayableBeg. Bal.Beg. Bal.End. Bal.End. Bal.< Required A3Required B2 Bal Sheet

1) Cash paid for interest: $70000 x 6% x 4/12 = $1400 (2) Interest expense: $70000 x 6% x 4/12 =…

The following selected transactions were taken from the books of Ripley Company for Year 1: 1. On February 1, Year 1, borrowed $70,.000 cash from the local bank. The note had a 6 percent interest rate and was due on June 1, Year 1. 2. Cash sales for the year amounted to $240,000 plus sales tax at the rate of 7 percent. 3. Ripley provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 1 percent of sales. 4. Paid the sales tax to the state sales tax agency on $210,000 of the sales. 5. Paid the note due on June 1 and the related interest. 6. On November 1, Year 1, borrowed $20,000 cash from the local bank. The note had a 6 percent interest rate and a one-year term to maturity. 7. Paid $2,100 in warranty repairs. 8. A customer has filed a lawsuit against Ripley for $1 million for breach of contract. The company attorney does not believe the suit has merit. Required a. Answer the following questions: 1. What amount of cash did Ripley pay for interest during Year 1? 2. What amount of interest expense is reported on Ripley's income statement for Year 1? 3. What is the amount of warranty expense for Year 1? b. Post the liabilities transactions to T-accounts and prepare the current liabilities section of the balance sheet at December 31, Year 1. c. Show the effect of these transactions on the financial statements using a horizontal statements model like the one shown here. Use + for increase, - for decrease, and NA for not affected. In the Cash Flow column, indicate whether the Item is an operating activity (OA). investing activity (IA), or financing activity (FA), or not affected (NA). The first transaction has been recorded as an example. Complete this question by entering your answers in the tabs below.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q