Fifteen transactions or events affecting Computer Specialists, Inc., are as follows:

a.       Made a year-end adjusting entry to accrue interest on a note payable.

b.       A liability classified for several years as long-term becomes due within the next 12 months.

c.       Recorded the regular biweekly payroll, including payroll taxes, amounts withheld from employees, and the issuance of paychecks.

d.       Earned an amount previously recorded as unearned revenue.

 

 

 

                                                                                                                                                                                                                       

 

e.    Made arrangements to extend a bank loan due in 60 days for another 18 months.

f.    Made a monthly payment on a fully amortizing installment note payable. (Assume this note is classified as a current liability.)

g.    Called bonds payable due in seven years at a price above the carrying value of the liability in the accounting records.

h.     Issued bonds payable at 97 on May 1, 2011. The bonds pay interest May 1 and November 1.

i.    Recorded November 1, 2011, interest expense and made semiannual interest payment on bonds referred to in part h.

j.     Recorded necessary adjusting entry on December 31, 2011, for bonds referred to in part h.

k.     Issued bonds payable at 102 on July 31, 2011. The bonds pay interest July 31 and January 31.

l.    Recorded necessary adjusting entry on December 31, 2011, for bonds referred to in part k.

m.    Recorded an estimated liability for warranty claims.

n.     Entered into a two-year commitment to buy all hard drives from a particular supplier at a price 10 percent below market.

o.    Received notice that a lawsuit has been filed against the company for $7 million. The amount of the company’s liability, if any, cannot be reasonably estimated at this time.

 

Instructions

Indicate the effects of each of these transactions upon the following elements of the company’s financial statements. Organize your answer in tabular form, using the column headings shown below. Use the following code letters to indicate the effects of each transaction on the accounting element listed in the column headings: I for increase, D for decrease, and NE for no effect.

 

Income Statement                                       Balance Sheet

Long-

 

 

Transaction a

 

Revenue - Expenses =

 

Net Income

 

Assets = Current +

Liab.

 

Term Liab.

 

+ Owners’

Equity