Norton Company purchased a building on January 2 by signing a long-term $480,000

Question

Norton Company purchased a building on January 2 by signing a long-term $480,000 mortgage with monthly payments of $4,500. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be $480,000. $479,500. $476,000. $475.500. The statement of cash flows is a required statement that must be prepared along an income statement, balance sheet, and retained earnings statement. A loss on sale of equipment Is added to net income In determining cash provide operations under the indirect method. The order of presentation of activities on the statement of cash flows is operating, investing, and financing. operating, financing, and investing. financing, operating, and investing. financing, investing, and operating.

Explanation / Answer

(24) & (25): Writing is not visible

(26) (c)

With each payment (which includes principal and interest payment), the Mortgage Note payable (a liability) decreases. So, journal entry is:

DR Mortgage Note payable

DR Interest expense

Cash

(27) (d)

Amount remaining after first payment = $(480,000 - 4,500) = $475,500

(28) True

(29) True

Since net income is arrived at after deducting loss on sale, it is added back to net income since this is not a cash flow from operating activities.

(30) (a)

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