Question

Note 1: On April 1, 2017 Warren Corporation received a $52,000, 10 percent note from a customer in settlement of a $52.000 open account receivable. According to the terms, the principal of the note and interest are payable at the end of 12 months. The annual accounting period for Warren ends on December 31, 2017 Note 2: On August 1, 2017, to meet a cash shortage. Warren Corporation obtained a $2,000, 12 percent loan from a local bank. The principal of the note and interest experte are payable at the end of six months Required: For the relevant transaction dates of each note, indicate the amounts and the direction of effects on the elements of the balance sheet and income statement. (Reminder: Assets Les Stockiers Equity Revenues - Expenses - Net Income, and Net income accounts are closed to retained Earnings, a part of Stockholders' Equity) (Do not round intermediate calculations. Indicate a decrease with a negative amount) Balance Sheet Llaties Stockholders Equity Income Statement Revenue Expenses Net Income Date Assets Note 1 April 1, 2017 December 31, 2017 March 31, 2018 Note 2 August 1, 2017 December 31, 2017 January 31, 2018

Answer 1

Solution:

Date	Assets	Liabilities	Stockholders Equity	Revenues	Expenses	Net Income
Note 1
April 1,2017	52,000
	-52,000
December 31,2017	3900		3900	3900		3900
March 31,2018	57200		1300	1300		1300
	55,900
Note 2
August1, 2017	52,000	52,000
December 31, 2017		2600	-2600		2600	-2600
January 31, 2018	-55120	-54,600	-520		520	-520

Explanation:

Note 1

3900 = 52000 x 10% x 9/12

57200 = (52000 x 10%) + 52000

1300 = 52000 x 10% x 3/12

55900 = 57200 - 1300

Note 2

2600 = 52000 x 12% x 5/12

55120 = (52000 x 12% x 6/12) - 52000

54600 = 52000 + 2600

520 = 52000 x 12% x 1/12