Exercise 9-2A 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 $1.400 of cash revenue. 2. Borrowed $2,600 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 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 (1A) 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. Reg A to ReqD What is the amount of interest payable at December 31, Year 17 (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) What is the amount of interest expense in Year 17 (Do not round Intermediate calculations. Round your answer to the nearest dollar amount.) What is the amount of interest paid in Year 1? Show less d. VVIOLIS ure di UILUI Res payaule di velen 31, Tedi 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. Reg A to C Reg D What is the amount of interest payable at December 31, Year 1? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) What is the amount of interest expense in Year 1? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) What is the amount of interest paid in Year 1? Show less B Interest payable Interest expense Amount of cash paid ReqD> Reg A to C Reg 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 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) 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. (Note: cells will require an input.) Show DARBY COMPANY Statements Model for Year 1 Income Statement Balance Sheet Liabilities Event Assets Stockholders' Equity Revenue Expense Net Income Statement of Cash Flows No Cash Notes Payable Interest Payable Common Stock Retained Earnings 1 1 OA 2 3 +
