Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation:

Earned $1,700 of cash revenue.

Borrowed $2,400 cash from the bank.

Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on September 1, Year 1, had a one-year term and an 9 percent annual interest rate.

Required: a. What is the amount of interest payable at December 31, Year 1? b. What is the amount of interest expense in Year 1? c. What is the amount of interest paid in Year 1? d. Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. The first transaction has been recorded as an example.

DARBY COMPANY

Horizontal Statements Model for Year 1

Event No

Balance Sheet

Income Statement

Statement of Cash Flow

Assets

=

Liabilities

+

Stockholders Equity

Revenue

Expenses

=

Net Income

Cash

=

Notes Payable

+

Interest Payable

+

Common Stock

+

Retained Earnings

1.

+

=

+

+

+

+

+

=

+

+

OA

2.

+selected answer correct

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+

+

+

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FAselected answer correct

3.

=

+

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+

=