R.T. Jackson started Jackson Company on January 1, 2014. The company experienced the following events during its first year of operation:

1.	Earned $1,200 of cash revenue for performing services.
2.	Borrowed $2,700 cash from the bank.
3.	Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on August 1, 2014, had a one-year term and a 7 percent annual interest rate.

Required

a.	What is the amount of interest expense in 2014? (Do not round intermediate calculations and round your final answer to nearest whole dollar amount.)

b.	What amount of cash was paid for interest in 2014?

c.

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 (I), 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), or financing activities (FA). The letters NA indicate that an element is not affected by the event. The first transaction has been recorded as an example.

JACKSON COMPANY

Horizontal Statements Model for 2014

Event No.

Balance Sheet

Income Statement

Statement of Cash Flows

Assets

=

Liabilities

+

Stockholders Equity

Revenue

Expenses

=

Net Income

Cash

=

Notes Payable

+

Interest Payable

+

Common Stock

+

Retained Earnings

1.

I

=

NA

+

NA

+

NA

+

I

I

NA

=

I

I

OA

2.

=

+

+

+

=

3.

=

+

+

+

=