Essay Questions
123. The following transactions apply to Baron Corporation.
1) Issued common stock for $21,000 cash.
2) Provided services to customers for $18,000 on account.
3) Borrowed $10,000 on September 1 at 8% interest with a one year term.
4) Purchased land for $18,000 cash.
5) Paid $9,000 for operating expenses.
6) Collected $15,000 cash from customers.
7) Recorded interest on the note payable at year end.
8) Paid $2,500 dividends to stockholders.
Required:
a) Identify the effect on the statement of cash flows for each of the above transactions.
b) Classify the above accounting events into one of four types of transactions (asset source, asset use, asset exchange, claims exchange).
124. Bristow Company borrowed $20,000 from First National Bank on July 31, 2011. The note carried a 6% interest rate with a one-year term to maturity.
Required:
1) Show the effects of borrowing the money and the December 31, 2011 adjustment on the accounting equation.
2) What is the amount of interest expense for 2011?
3) Prepare a statement of cash flows for the Ulmer Company for 2011.
125. On October 1, 2011, Tanner Company borrowed $22,000 from the bank by issuing a one year 8% interest bearing note.
a) Prepare the journal entry to record the issuance of the note.
b) Compute the amount of interest expense that will be shown on the 2011 income statement.
c) What is the total amount of cash that will be paid to the bank at the maturity of the note on October 1, 2012?
d) Prepare the liabilities section of the balance sheet at December 31, 2011.