For each of the following items, (1) identify the accounts affected and give the amounts by which they would be increased or decreased; (2) state the amount of any cash flow and whether cash is increased or decreased; and (3) identify how each item would be reported in the statement of cash flows.
a. Annual interest of 6% is paid on $500,000 of bonds payable that were issued last year.
b. A licence was purchased for $50,000 at the beginning of this year. The licence is being amortized over five years at a rate of $10,000 per year.
c. Old equipment is sold for $40,000. The asset originally cost $160,000 and has accumulated depreciation of $125,000.
d. New equipment is purchased for $200,000. A cash payment of $50,000 is made and a long-term note for $ 150,000 is issued for the remainder.
e. A down payment of $2,000 is received in advance from a customer.
f. Income tax expense for the year is $85,000: $70,000 of this amount was paid during the year and the remainder will be paid next year.