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 10% VAT.
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. Recorded an environmental liability and related asset.
10. Recorded bonuses due to employees.
11. Recorded sales of product.
12. Honored warranty contracts in the period of sale, reducing the asset repair parts.
13. Recorded a liability on a lawsuit that the company will probably lose.
Instructions
Set up a table using the format shown below and analyze the effect of the 13 transactions on the financial statement categories indicated.
Use the following code:
I: Increase D: Decrease NE: No net effect
