Financial Statement Impact of Liability Transactions Presented below is a list of possible transactions.
1. Purchased inventory for $80,000 on account (assume perpetual system is used).
2. Issued an $80,000 note payable in payment on account (see item 1 above).
3. Recorded accrued interest on the note from item 2 above.
4. Borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note.
5. Recognized 4 months’ interest expense on the note from item 4 above.
6. Recorded cash sales of $75,260, which includes 6% sales tax.
7. Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various amounts withheld.
8. Recorded employer’s payroll taxes.
9. Accrued accumulated vacation pay.
10. Recorded an asset retirement obligation.
11. Recorded bonuses due to employees.
12. Recorded sales of product and related warranties (assume sales warranty approach).
13. Accrued warranty expense (assume expense warranty approach).
14. Paid warranty costs that were accrued in item 13 above.
15. Recorded a contingent loss on a lawsuit that the company will probably lose.
16. Paid warranty costs under contracts from item 12.
17. Recognized warranty revenue (see item 12).
18. Recorded estimated liability for premium claims outstanding. Set up a table using the format shown below and analyze the effect of the 18 transactions on the financial statement categories indicated. Use the following code:
I: Increase D: Decrease NE: No neteffect