Flowers Ltd. is a Canadian business operating in the outdoor furniture industry. The company manufactures and distributes
Question:
Flowers Ltd. is a Canadian business operating in the outdoor furniture industry. The company manufactures and distributes outdoor furniture to Canadian retailers. You work in the accounting department of Flowers.
For the year ended December 31, 2022, you have been asked to analyze the following two transactions:
January 1st, 2022: Obtained a $1,000,000 bank loan. Flowers is required to make interest payments of 6% per year, due each January 1 (starting on January 1, 2023). The loan contract requires the loan be repaid in full on December 31, 2026.
January 2nd, 2022: Used the above-mentioned bank loan to purchase new manufacturing equipment. The equipment will be used to manufacture a new type of high-quality outdoor table made from recycled materials. The machinery is expected to last 5 years.
Required:
For each of the above, what will be the impact, on the date of the transaction and at the end of the year, on the income statement and/or balance sheet?
Indicate the statement, section and line item that will increase/decrease.
Quantitative Methods for Business
ISBN: 978-0324651751
11th Edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey cam