exercise 7-2 6 Help Save&Exit; Check m Bill Darby started Darby Company on Janua
ID: 2547644 • Letter: E
Question
exercise 7-2 6 Help Save&Exit; Check m Bill Darby started Darby Company on January 1, 2018. The company experienced the following events during its first year of operation 10 points 1. Earned $1,100 of cash revenue. 2. Borrowed $2,000 cash from the bank ng records to recognize accrued interest expense on the bank note. The note, Issued on September 1 2018. had a one-year term and an 9 percent annual interest rate. eBook Required a. What is the amount of interest expense in 2018? b. What amount of cash was paid for interest in 2018? c Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash Print flows. Indicate whether the event increases (. decreases (D), or does not affect (NA) each element of the financial statements. In the Cash Flows column, designate the cash flows as operating activities (OA), Investing activities (IA), or financing activities (FA). The first transaction has been recorded as an example. References Complete this question by entering your answers in the tabs below. Req A and B | Reg C is the amount of interest expense and the cash paid for interest in 2018? (Do not round intermediate calculations and round your final answer to nearest whole dollar amount.) a. Interest expense b. Amount of cash Prey 1 of 1 Next>Explanation / Answer
Calculation of Interest expense:
Period =4 months(Sep1 to Dec31)
Interest rate=9%
Amount of note=$2,000
Interest expense=2000*0.09*(4/12)=$60
Term of note=1 year
Cash expense on interest=Nil
Interest Expense
$ 60
Amount of cash
$0
Asset
=
Liability
+
Common Equity
+
Retained earning
Revenue
-
Expense
=
Income
1
$1,100
$1,100
$1100
$1,100
2
$2,000
$2,000
3
$60
($60)
$60
($60)
Operating activity Cash flow
+
Investing Activity cash flow
+
Financing Activity cash flow
=
Total Cash flow
1
$1,100
$1,100
2
$2,000
$2,000
Interest Expense
$ 60
Amount of cash
$0
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