Bricca Co. issued a $60,000 face value discount note to First Bank on June 1, Year 1. The note had a 6 percent discount rate and a one-year term to maturity.

Required
Show the effects of the following transactions (a–c) on the financial statements using a horizontal financial statement model such as the one shown next. Record the transaction amounts under the appropriate categories. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA).

a. The issuance of the note on June 1, Year 1.
b. The adjustment for accrued interest at the end of the year, December 31, Year 1.
c. Recording interest expense for Year 2 and repaying the principal on May 31, Year 2.

Balance Sheet Income Statement Statement of Cash Flows Llabilitles Stk. Equity Assets Carrylng Value of Note Pay. Net Inc. Cash Ret. Earn. Exp. Rev.