E4-10 Determining Financial Statement Effects of Interest on Two Notes L04-1 Note 1: On April 1 of the current year, Warren Corporation received a $42,000, 6 percent note from a customer in settlement of a $42,000 open account receivable. According to the terms, the principal of the note and interest are payable at the end of 12 months. Warren's fiscal year ends on December 31. Note 2: On August 1 of the current year, to meet a cash shortage, Warren Corporation obtained a $42,000, 7 percent loan from a local bank. The principal of the note and interest expense are payable at the end of six months. Required: For the relevant transaction dates of each note, indicate the amounts and direction of effects on the elements of the statement of financial position and the statement of earnings. (Reminder: Assets = Liabilities + Shareholders' equity; Revenues - Expenses = Net earnings; and net earnings accounts are closed to retained earnings, a component of shareholders' equity.) (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)
E4-10 Determining Financial Statement Effects of Interest on Two Notes L04-1 Note 1: On April 1 of the current year, Warren Corporation received a $42,000, 6 percent note from a customer in settlement of a $42,000 open account receivable. According to the terms, the principal of the note and interest are payable at the end of 12 months. Warren's fiscal year ends on December 31. Note 2: On August 1 of the current year, to meet a cash shortage, Warren Corporation obtained a $42,000, 7 percent loan from a local bank. The principal of the note and interest expense are payable at the end of six months. Required: For the relevant transaction dates of each note, indicate the amounts and direction of effects on the elements of the statement of financial position and the statement of earnings. (Reminder: Assets = Liabilities + Shareholders' equity; Revenues - Expenses = Net earnings; and net earnings accounts are closed to retained earnings, a component of shareholders' equity.) (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter9: Current Liabilities And Contingent Obligations
Section: Chapter Questions
Problem 3E: Non-Interest-Bearing Notes Payable On November 16, 2019, Clear Glass Company borrowed 20,000 from...
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Transcribed Image Text:E4-10 Determining Financial Statement Effects of Interest on Two Notes L04-1
Note 1: On April 1 of the current year, Warren Corporation received a $42,000, 6 percent note from a customer in settlement of a
$42,000 open account receivable. According to the terms, the principal of the note and interest are payable at the end of 12 months.
Warren's fiscal year ends on December 31.
Note 2: On August 1 of the current year, to meet a cash shortage, Warren Corporation obtained a $42,000, 7 percent loan from a local
bank. The principal of the note and interest expense are payable at the end of six months.
Required:
For the relevant transaction dates of each note, indicate the amounts and direction of effects on the elements of the statement of
financial position and the statement of earnings. (Reminder: Assets = Liabilities + Shareholders' equity; Revenues - Expenses = Net
earnings; and net earnings accounts are closed to retained earnings, a component of shareholders' equity.) (Do not round
intermediate calculations. Enter any decreases to account balances with a minus sign.)
Note 1:
Date
April 1 (current year)
December 31 (current year)
March 31 (next year)
Note 2:
August 1 (current year)
December 31 (current year)
January 31 (next year)
Statement of Financial Position
Assets
42,000
(42,000)
1,890
(43,890)
44,520
42,000
(43,470)
Liabilities
42,000
1,225
(43,225)
Shareholders'
Equity
1,890
630
(1,225)
(245)
Statement of Earnings
Revenues Expenses Net Earnings
1,890
1,225
245
Help
1,890
630
(1,225)
(245)
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