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Haley Company had the following transactions during fiscal year ended December 31, 2022: a. On April 1, 2022, purchase of equipment with cash of
Haley Company had the following transactions during fiscal year ended December 31, 2022: a. On April 1, 2022, purchase of equipment with cash of $90,000 (equipment has an estimated life of five years with no salvage value). b. On July 1, 2022, purchase of a three-year insurance policy for $75,000. c. On October 1, 2022, loaned $150,000 to a CEO who signed a note for the loan, with principal and interest at 6% on the note due in one year. d. On December 1, 2022, borrowed $240,000 from the bank (i.e., issued notes), with repayment of principal to be made in 10 equal installments beginning December 1, 2023, with interest of 5% due annually on the same date. Required: 1. Record each of the above transactions. Identify the impact on net income of each transaction. Identify the net income effect of each journal entry. Identify the effect on assets, liabilities, and equity for each transaction. 2. For each of the above transactions, record the necessary adjusting journal entry at December 31. Identify the net income effect of each adjusting journal entry. Identify the effect on assets, liabilities, and equity for each adjusting journal entry. 3. Calculate (and show your work for) the total amount that net income would be overstated or understated if the adjusting journal entries in # 2 had not been recorded.
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