Determining the Impact of Transactions, Including Analysis of Cash FlowsVernon Company sel...

Determining the Impact of Transactions, Including Analysis of Cash Flows

Vernon Company sells a wide range of goods through two retail stores operated in adjoining cities. Most purchases of goods for resale are on invoices. Occasionally, a short-term note payable is used to obtain cash for current use. The following transactions were selected from those occurring during 2012:

a. Purchased merchandise on credit. $18.000 on January 10, 2012; the company uses a periodic inventory system.

b. Borrowed $45.000 cash on March 1, 2012. from City Bank and gave an interest-bearing note payable: face amount. $45.000. due at the end of six months, with an annual interest rate of 10 percent payable at maturity.

Required:

1. Describe the impact of each transaction on the balance sheet equation. Indicate the effects (e.g.. cash - or - I. using the following schedule:

2. What amount of cash is paid on the maturity date of the note?

3. Discuss the impact of each transaction on Vernon's cash flows.