Presented below is a list of possible transactions.

1. Purchased inventory for $80,000 on account (assume perpetual system is used).

2. Issued an $80,000 note payable in payment on account (see item 1 above).

3. Recorded accrued interest on the note from item 2 above.

4. Borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest bearing note.

5. Recognized 4 months' interest expense on the note from item 4 above.

6. Recorded cash sales of $75,260, which includes 6% sales tax.

7. Recorded accrued property taxes payable.

8. Recorded bonuses due to employees.

9. Recorded a contingent loss on a lawsuit that the company will probably lose.

10. Accrued warranty expense (assume expense warranty approach).

11. Paid warranty costs that were accrued in item 10 above.

12. Recorded sales of product and related warranties (assume sales warranty approach).

13. Paid warranty costs under contracts from item 12 above.

14. Recognized warranty revenue (see item 12 above).

Instructions

Set up a table using the format shown below and analyze the effect of the 14 transactions on the financial statement categories indicated.

Use the following code:
I: Increase D: Decrease NE: No net effect

Transcribed Image Text:

Assets Liabilities Stockholders' Equity Net Income