Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $2,000 of cash revenue. 2. Borrowed $2,500 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 6 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, decreases, or increases and decreases each element of the financial statements. In the Statement of 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 Req C a. What is the amount of interest expense in Year 1? b. What amount of cash was paid for interest in Year 1? Note: Do not round intermediate calculations. a. Interest expense b. Cash paid for interest < Req A and B Req C > Screenshot 2024-04-06 at 8.25.46 AM v Q Search DARBY COMPANY Horizontal Statements Model for Year 1 Income Statement Balance Sheet Event Number Assets Liabilities Stockholders' Equity Revenue Cash Notes Payable + Interest Payable Common Stock + Retained Earnings 1. Increase + + + Increase Increase 2. = + + + 3. = + + Expenses Statement of Cash Flows Net Income Increase Increase OA