Question 4 - Reporting and analyzing liabilities (20 marks) Skate City Corporation sells skateboard products and also operates an indoor skating facility. During the last part of 2021, Skate City had the following transactions related to notes payable. Aug. 1 Issued a $6,000 note to Wheeler to purchase inventory. The 3-month note payable bears interest of 9% and is due November 1. Aug. 31 Recorded accrued interest for the Wheeler note. Sept. 1 Issued a $15,000, 8%, 6-month note to Commerce Bank to finance the purchase of a new ramp for advanced boarders. The note is due March 1. Sept. 30 Recorded accrued interest for the Wheeler note and the Commerce Bank note. Oct. 1 Issued a $40,000 note and paid $10,000 cash to repair and improve its building. This note bears interest of 8% and matures in 12 months. Oct. 31 Recorded accrued interest for the Wheeler note, the Commerce Bank note, and the improvement note. Nov. 1 Paid principal and interest on the Wheeler note. Nov. 30 Recorded accrued interest for the Commerce Bank note and the improvement note. Dec. 31 Recorded accrued interest for the Commerce Bank note and the improvement note. Instructions (a) Prepare journal entries for the transactions noted above. (10 points) (b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts. (Use T-accounts.) (5 points) (c) Show the balance sheet presentation of notes payable and interest payable at December 31. (3 points) (d) How much interest expense relating to notes payable did Skate City incur during the year? (2 points) Question 5 - Reporting and Analyzing Stockholders' Equity (20 marks) Jakarta Corporation decided to issue common stock and used the $120,000 proceeds to retire all of its outstanding bonds on January 1, 2021. The following information is available for the company for 2020 and 2021. Instructions Net income Average stockholders' equity Total assets Current liabilities Total liabilities 2021 $ 120,000 2020 $ 100,000 1,000,000 1,200,000 800,000 1,200,000 100,000 360,000 100,000 480,000 (1) Compute the return on common stockholders' equity for both years. (5 marks) (2) Explain how it is possible that net income increased, but the return on common stockholders' equity decreased. (5 marks) (3) Compute the debt to assets ratio for both years, and comment on the implications of this change in the company's solvency. (10 marks)