Ben Pratt started a moving company on January 1, 2013. On March 1, 2013, Pratt borrowed cash from a local bank by issuing a one-year $80,000 face value note with annual interest based on a 12 percent discount. During 2013, Pratt provided services for $65,400 cash.
Answer the following questions.
Record the events in T-accounts prior to answering the questions.
a. What is the amount of total liabilities on the December 31, 2013, balance sheet?
b. What is the amount of net income on the 2013 income statement?
c. What is the amount of cash flow from operating activities on the 2013 statement of cash flows?
d. Provide the general journal entries necessary to record issuing the note on March 1, 2013; recognizing accrued interest on December 31, 2013; and repaying the loan on February 28, 2014.