MBA 601 Module 3 - Video 5 Study Guide Exam and Actual Answers.

On November 1, Year 1 Cove Company borrowed $7,000 cash to from Shelter Company. The one-year note carried a 7% rate of interest. Which of the following shows how the loan will affect Cove's financial statements on November 1, Year 1? - Answer A = 7,000 L = 7,000 Cash Flows = 7,000 FA Accrued interest expense will appear on the income statement but not on the statement of cash flows. This statement is True/False - Answer True Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest expense that Clayton would report in Year 1 and Year 2, respectively would be - Answer $270, and $90. On August 1, Year 1 Gomez Company borrowed $48,000 cash. The one-year note carried a 5% rate of interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will effect Gomez's ledger accounts? - Answer IP = 1,000 RE = (1,000) On August 1, Year 1 Gomez Company borrowed $48,000 cash. The one-year note carried a 5% rate of interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will effect Gomez's financial statements? - Answer L = 1,000 E = (1,000) Exp = 1,000 NI = (1,000) On August 1, Year 1 Gomez Company borrowed $48,000 cash. The one-year note carried a 5% rate of interest. Which of the following shows how the accrual of interest expense in Year 1 will effect Gomez's financial statements? - Answer L = 1,000 e = (1,000) Exp = 1,000 NI = (1,000) Forest Beach Company experienced an event that had the following effects on its financial statements.