1. Byers Corporation purchased equipment by issuing a 10-year, $400,000 interest-bearing note at a stated rate of 10 percent (payable annually). Given this information and assuming that a market interest rate of 8%, make journal entry for this transaction.
2. On January 1, 2018, Cabuki Corporation issued $500,000 of 10 percent, 10-year bonds at 88.5. Interest is payable on December 31. If the market rate of interest was 12 percent at the time the bonds were issued, how much cash was paid for interest in 2018?
3. Rena Company completed its first year of operations on December 31, 2018. Its initial income statement showed that Recife had revenues of $780,000 and operating expenses of $312,000. Accounts receivable and accounts payable at year-end were $192,000 and $100,000, respectively. Assume that accounts payable related to operating expenses. (Ignore income taxes.) Compute net cash provided by operating activities using the direct method.