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 $16,200 of cash revenue. 2. Borrowed $12,000 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 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), decreases (D), or does not affect (NA) each element of the financial statements. In the Cash Flows column, designate the cash flows as operating activities (OA), investing activities (IA), financing activities (FA), or not affected (NA). 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? (Do not round intermediate calculations.) What is the amount of interest expense in Year 1? What is the amount of interest paid in Year 1? a. Interest payable b. Interest expense c. Amount of cash paid Req 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 decreases (D), or does not affect (NA) each element of the financial statements. In the Cash Flows column, designate the cash flows as operating activities ( (IA), financing activities (FA), or not affected (NA). The first transaction has been recorded as an example. (Do not round intermediate calculations.) DARBY COMPANY Statements Model for Year 1 Balance Sheet Income Statement Statement of Cash Flow Event Assets = Liabilities Stockholders' Equity Revenue Net Income Expense No Cash Notes Payable + Interest Payable + Common Stock + Retained Earnings - 1. 1 = NA + NA + NA + 1 1 NA = = | 1 OA 2. = + + - + + 3. = + + =