Exercise NO: 16

Presented below is a list of possible transactions.\n1. Purchased inventory for $80,000 on account (assume perpetual system is used).\n2. Issued an $80,

Presented below is a list of possible transactions.

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1. Purchased inventory for $80,000 on account (assume perpetual system is used).

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2. Issued an $80,000 note payable in payment on account (see item 1 above).

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3. Recorded accrued interest on the note from item 2 above.

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4. Borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note.

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5. Recognized 4 months’ interest expense on the note from item 4 above.

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6. Recorded cash sales of $75,260, which includes 6% sales tax.

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7. Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various amounts withheld.

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8. Recorded employer’s payroll taxes.

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9. Accrued accumulated vacation pay.

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10. Recorded an asset retirement obligation.

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11. Recorded bonuses due to employees.

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12. Recorded a contingent loss on a lawsuit that the company will probably lose.

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13. Accrued warranty expense (assume expense warranty approach).

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14. Paid warranty costs that were accrued in item 13 above.

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15. Recorded sales of product and related warranties (assume sales warranty approach).

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16. Paid warranty costs under contracts from item 15 above.

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17. Recognized warranty revenue (see item 15 above).

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18. Recorded estimated liability for premium claims outstanding.

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Instructions

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Set up a table using the format shown below and analyze the effect of the 18 transactions on the financial statement categories indicated

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