ces Exercise 9-2A (Algo) Effects of recognizing accrued interest on financial statements LO 9-1 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 $2,800 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 5 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. Indicate whether the event increases (1) or decreases (D) each element of the financial statements. In the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA) or financing activities (FA). Columns for events that have no effect on any of the elements should be left blank. The first transaction has been recorded as an example. Complete this question by entering your answers in the tabs below. 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. Indicate whether the event increases (1) or decreases (D) each element of the financial statements. In the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA) or financing activities (FA). Columns for events that have no effect on any of the elements should be left blank. The first transaction has been recorded as an example.. Complete this question by entering your answers in the tabs below. Req A to C Req D What is the amount of interest payable at December 31, Year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. What is the amount of interest expense in Year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. What is the amount of interest paid in Year 1? a. Interest payable b. Interest expense c. Amount of cash paid Show less A Req A to C Req D 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 ( the financial statements. In the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA) or financing activities (FA). Colum any of the elements should be left blank. The first transaction has been recorded as an example. Note: Not all cells will require an input. Event Number 1. 2 3. DARBY COMPANY Horizontal Statements Model for Year 1 Balance Sheet Income Statement Assets Liabilities Stockholders' Equity Revenue Expense Net Income Statement of Cash Flows Cash Notes Payable Interest Payable Common Stock Retained Earnings OA