Problem $7-29$A $($Algo$)$ Current liabilities LO $7-1,7-2,7-3,7-4$

The following selected transactions were taken from the books of Ripley Company for Year $1$:

On February $1,$ Year $1,$ borrowed $$54,000$ cash from the local bank. The note had a $6$ percent interest rate and was due on June $1,$

Year $1.$

Cash sales for the year amounted to $$245,000$ plus sales tax at the rate of $8$ percent.

Ripley provides a $90-$day warranty on the merchandise sold. The warranty expense is estimated to be $4$ percent of sales.

Paid the sales tax to the state sales tax agency on $$190,000$ of the sales.

Paid the note due on June $1$ and the related interest. Record payment of interest as transaction $5$ a and the repayment of the

principal note as transaction $5$b$.$

On November $1,$ Year $1,$ borrowed $$50,000$ cash from the local bank. The note had a $9$ percent interest rate and a one$-$year term to

maturity.

Paid $$3,200$ in warranty repairs.

A customer has filed a lawsuit against Ripley for $$12$ million for breach of contract. The company attorney does not believe the suit

has merit.

Required

a$.$ Answer the following questions:

What amount of cash did Ripley pay for interest during Year $1?$

What amount of interest expense is reported on Ripley's income statement for Year $1?$

What is the amount of warranty expense for Year $1?$

b$.$ Prepare the current liabilities section of the balance sheet at December $31,$ Year $1.$

c$.$ Show the effect of these transactions on the financial statements using a horizontal statements model. Indicate whether the event

increases, decreases, or increases and decreases each element of the financial statements. In the Statement of Cash Flows

column, designate the cash flows as operating activities $($OA$),$ investing activities $($IA$),$ or financing activities $($FA$).$ The first transaction

has been recorded as an example.