The following selected transactions were taken from the books of Ripley Company for Year 1: 1. On February 1 Year 1, borrowed $58,000 cash from the local bank. The note had a 5 percent Interest rate and was due on June 1, Year 1 2. Cash sales for the year amounted to $240,000 plus sales tax at the rate of 5 percent 3. Ripley provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 4 percent of sales. 4. Pald the sales tax to the state sales tax agency on $200,000 of the sales. 5. Pald the note due on June 1 and the related interest 6. On November 1 Year 1 borrowed $37000 cash from the local bank. The note had a 6 percent interest rate and a one-year term to maturity 7. Pald $3,800 in warranty repairs. 8. A customer has filed a lawsuit against Ripley for $11 million for breach of contract. The company attorney does not believe the suit has merit Required a. Answer the following questions: 1. What amount of cash did Ripley pay for Interest during Year 1? 2. What amount of interest expense is reported on Ripley's income statement for Year 1? 3. What is the amount of warranty expense for Year 1? b. Prepare the current liabilities section of the balance sheet at December 31, Year 1. c. Show the effect of these transactions on the financial statements using a horizontal statements model like the one below. Use + for increase, - for decrease, and leave the cell blank if there is no effect. In the Cash Flow column, indicate whether the item is an operating activity (OA), Investing activity (A), or financing activity (FA). The first transaction has been recorded as an example, Complete this question by entering your answers in the tabs below. Required A Required Required 1. What amount of cash did Ripley pay for interest during Year 1? 2. What amount of interest expense is reported on Ripley's income statement for Year 1? 3. What is the amount of warranty expense for Year 12 (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) Show less Complete this question by entering your answers in the tabs below. Required A Required B Required 1. What amount of cash did Ripley pay for interest during Year 1? 2. What amount of interest expense is reported on Ripley's income statement for Year 1? 3. What is the amount of warranty expense for Year 1? (For all requirements, do not round Intermediate calculations. Round your final answers to nearest wh 1. Cash paid for interest 2. Interest expense 3. Warranty expense (Required Required B Prepare the current liabilities section of the balance sheet at December 31, Year 1. (Do not round intermediate calculations.) RIPLEY COMPANY Balance Sheet (Partial) As of December 31, Year 1 Current liabilities Total current liabilities $ 0 Show the effect of these transactions on the financial statements using a horizontal statements model like the one below. Use + fa increase, - for decrease, and leave the cell blank if there is no effect. In the Cash Flow column, indicate whether the item is an op activity (OA), investing activity (IA), or financing activity (FA). The first transaction has been recorded as an example. (Not all cell require entry) She RIPLEY COMPANY Horizontal Statements Model Income Statement Not Equity Revenuo - Exponse Incomo Balance Sheet Statement of Cash Flow Event Assets Liabilities - 1. + FA + 2. 3 4. 5a 5b. 6. 7 III 8
