Sam Company borrowed $40,000 from the bank on December 1, 2014. The note had an 8 percent annual interest rate and matured on May 31, 2015, when Sam paid the principal and interest on the note.

Required:

a) What amount of cash did Sam pay for interest in 2014?

b) What amount of interest expense did Sam report on the 2014 income statement?

c) What was the amount of liabilities that Sam reported on its balance sheet at the end of 2014?

d) What was the amount of cash that Sam paid to the bank on May 31, 2015? How was the cash payment reported on the statement of cash flows?

e) What amount of interest expense was reported on the 2015 income statement?

FILL IN THE FOLLOWING:

a) _________________________________________________

b) _________________________________________________

c) _________________________________________________

d) _________________________________________________

$__________ would be reported as a cash outflow from financing activities

$__________ would be reported as a cash outflow from operating activities

e) _________________________________________________