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Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $1,500

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Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $1,500 of cash revenue. 2. Borrowed $2,200 cash from the bank. 3. 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 8 percent annual interest rate. Required a. What is the amount of interest expense in Year 1? b. What amount of cash was paid for interest in Year 1? c. Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (1) or decreases (D), or if there is no effect, leave the cell blank. In the Cash Flows column, designate the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). The first transaction has been recorded as an example. Complete this question by entering your answers in the tabs below. Req A and B Reqc What is the amount of interest expense and the cash paid for interest in Year 1? (Do not round intermediate calculations and round your final answer to nearest whole dollar amount.) a. Interest expense b. Amount of cash Complete this question by entering your answers in the tabs below. Req A and B Req c Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate w decreases (D), or if there is no effect, leave the cell blank. In the Cash Flows column, designate the cash flows as operating activities (OA), invest activities (FA). The first transaction has been recorded as an example. (Not all cells will require entry.) DARBY COMPANY Horizontal Statements Model for Year 1 Balance Sheet Income Statement Assets = Event No. + Liabilities Notes Interest + Payable Payable Stockholders' Equity Common Retained + Stock Earnings Statement of Cash Flows Revenue Net Income Expenses Cash 1. I + + I I I 2. + + + + = + + 3. +

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