Chapter 4, Problem 4.14E

Determining Financial Statement Effects of Adjustments for Interest on Two Notes

Note 1: On April 1, 2017. Warren Corporation received a $30,000. 10 percent note from a customer in settlement of a $30,000 open account receivable. According to the terms, the principal of the note and interest are payable at the end of 12 months. The annual accounting period for Warren ends on December 31.2017.

Note 2: On August 1, 2017, to meet a cash shortage. Warren Corporation obtained a $30,000. 12 percent loan from a local hank. The principal of the note and interest expense are payable at the end of six months.

Required:

For the relevant transaction dates of each note, indicate the amounts and the direction of effects on the elements of the balance sheet and income statement. Using the following format, indicate + for increase. − for decrease, and NE for no effect. (Reminder: Assets = Liabilities + Stockholders' Equity; Revenues - Expenses = Net Income; and Net Income accounts are closed to Retained Earnings, a part of Stockholders' Equity.)

Date	BALANCE SHEET			INCOME STATEMENT
	Assets	Liabilities	Stockholders’ Equity	Revenues	Expenses	Net Income
Note1 April 1, 2017
December 31, 2017
March 31, 2018
Note 2 August 1, 2017
December 31, 2017
January 31, 2018