Paragraph Styles Exercise 2-13B Effects of recognizing accrued Interest on financial statements Carry Connelly started Connelly Company on January 1. Year 1. The company experienced the follow ing events during its first year of operation: 1. Earned $6,200 of cash revenue. 2. Borrowed $10,000 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 I, had a one-year term and a 9 percent annual interest rate Required a. What is the amount of interest payable at December 31, Year 19 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 financial statements model to show how cach event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (1), de creases (D), or does not affect (NA) cach element of the financial statements. Also, in the Statement of Cash Flows column, designate the cash flows as operating activities (OA), invest- ing activities (IA), or financing activities (FA). The first transaction has been recorded as an example. Balance Sheet Income Statement Assets Llab Stk. Equity Statement of Cash Flows Event Cash Notes Pay. + Int. Pay. + Com. Stk. + Ret. Earn Rev. - Exp. Net Inc. NA NA NA are tryn AAEEEEET AaBbCcl AaBbc AaBb C AaBbcc - A- E B Emphasis T Heading 1 Heading 2 T Heading 3 Paragraph Styles - NA - TOAT 1 - NA + NA + NA + 1 Connely Company Statement Model for Year 1 Satment of Ros Balance Sheet abilities Income Statement Net Inc Asus Stockholders' Equity Common Ret Earn Notes Payable Pavel Aa AEE-E21 -A- B. l Emphasis T Heading 1 Heading 2 T Heading 3 T Paragraph Styles LO 2-5 Exercise 2-14B Recognizing accred interest expense California Company borrowed $120,000 from the issuance of a note payable on August 1 Year 1. The note had a 7 percent annual rate of interest and a one year term to maturity Required 3. What amount of interest expense will California recognize for the year ending December 31. Year 1? b. Show how the recognition of accrued interest expense on December 31, Year 1, affects the account ing equation e. What amount of cash will California pay for interest expense in Year 1? d. What is the amount of interest payable as of December 31. Year 1? e. What amount of cash will California pay for interest expense in Year 21 f. What amount of interest expense will California recognize in Year 2? 8. What is the amount of interest payable as of December 31, Year 2? Balance Sheet Assets = Liabilities A + Stockholders' Equity Notes Int. Common Ret. Earn. Cash - Payable + Payable + Stock Event Note Adj. LO 26 Exercise 2-15B Determine missing amounts in the accounts receivable account Required Determine the missing amounts in cach of the following four independent scenarios: 1. W Co. had a $5.000 beginning balance in accounts receivable on January 1 Year 4. During Year 4. the company corned $72,500 of revenue on account and collected $70,000 cash from accounts receivable. W Co. Accounts Receivable Summary Beginning AR Balance Increase in AR Reduction in AR Endings Accounts Receivable Balance b. W Co. had a $3,200 ending balance in accounts receivable on December 31, Year 4. During Year 4, the company carned $60,600 of revenue on account and collected $61.200 cash from accounts receivable. Based on this information alone, determine the amount of the beginning balance in accounts receivable. W Co. Accounts Receivable Summary Beginning AR Balance Increase in AR Reduction in AR Endings Accounts Receivable Balance FAB_16_CH02_Working Papers (1) - Compatibility Mode - Saved - Help Table Design Layout erences Mailings Review View EXERCISE 2-15B (cont.) e. W Co. had an S11,300 beginning balance in accounts receivable on January 1 Year 4. During Year 4 the company earned $102,400 of revenue on account. The ending balance in accounts receivable was $15,800. Based on this information alone, determine the amount of cash collections from ac counts receivable. W Co. Accounts Receivable Summary Beginning AR Balance Increase in AR Reduction in AR Endings Accounts Receivable Balance d. W Co. had an $18.000 beginning balance in accounts receivable on January 1 Year 4. During Year 4. the company collected $125,000 of revenue on account. The ending balance in accounts receivable was $28.500. Based on this information alone, determine the amount of cash collections from accounts receivable. W Co. Accounts Receivable Summary Beginning AR Balance Increase in AR Reduction in AR Endings Accounts Receivable Balance as LO 2-5 Mailings Review View Help Table Design Layout Exercise 2-963 Determine missing amounts in the accounts payer e account Required Determine the missing amounts in each of the following for independent scenarios W Co. had a $5,500 beginning balance in accounts payable on January 1. Year 8. During Your & the company incurred 545,200 of operating expenses on account and paid $43,100 cash to settle accounts payable. Based on this information alone, determine the amount of the ending balance in accounts payable w Co. Accounts Payable Summary Beginning accounts payable balance Plus: Minus: Ending accounts payable balance b. W Co. had a $5.300 nding balance in accounts payable on December 31. Year 8. During Year 8, the company incurred $55.200 of operating expenses on account and paid $54,600 cash to settle accounts payable. Based on this information alone, determine the amount of the beginning balance in accounts payable. W Co. Accounts Payable Summary Beginning accounts payable balance Plus: Minus: Ending accounts payable balance