Brock Company issued $94,000 face value of bonds on January 1, 2014. The bonds h
ID: 2419539 • Letter: B
Question
Brock Company issued $94,000 face value of bonds on January 1, 2014. The bonds had a 9 percent stated rate of interest and a 10-year term. Interest is paid in cash annually, beginning December 31, 2014. The bonds were issued at 98.
Required
a. Use a financial statements model like the one shown below to demonstrate how (1) the January 1, 2014, bond issue and (2) the December 31, 2014, recognition of interest expense, including the amortization of the discount and the cash payment, affects the company’s financial statements. Use + for increase, ? for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA) and NA for not affected.
BROCK COMPANY Effect of Transactions on Financial Statements Balance Sheet Income Statement Event No Statement of Cash Flow Assets = Liabilities + Stockholders' Revenues - Expenses = Income Net Equity 2a. 2b.Explanation / Answer
Answer:
Brock Comapny ( Balance sheet )
Effect of Transaction on Fiancial statements
Assets = Liabilities + Stock holder's equity Statement of cash flow
1. $ 94,000 = $ 94,000 + 0 Investing Activity
Brock Comapny ( Income Statement )
Effect of Transaction on Fiancial statements
Revenues - Expenses = Net Income Statement of cash flow
1. 0 - 8460 = - 8460 Operating activities
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