Question

"Listed as follows are eight events or transactions of Lone Star Corporation. a. Made an adjusting entry to record interest on a short-term note payable. b. Made a monthly installment payment of a fully amortizing, six-month, interest-bearing installment note payable. c. Recorded a regular biweekly payroll, including the amounts withheld from employees, the issuance of paychecks, and payroll taxes on the employer. d. Came within 12 months of the maturity date of a note payable originally issued for a period of 24 months. (Page 469)."

Answer 1

Answer:

The reasons for each of the given transactions are mentioned below.

Part a.  

Interest accrued on notes payable increase the current liabilities as well as interest expense for the period whereas net income and owner's equity are decreased with the same. However, revenue and assets are not affected.

Part b.  

The current liabilities for the interest-bearing installment note payable and cash as asset decreased as well as net income and owner's equity also decreased. However, interest expense for the period is increased whereas revenue not affected.

Part c.

The payroll expense for the period as an expense and payroll tax payable including employees amount withheld as current liability increased. Net income for the period and cash as asset decreased. However, revenue and long-term liabilities are not affected.

Part d.

In the given case, the notes payable which were originally issued for 24 months such as long-term liabilities came within the 12 months of the maturity date. Therefore. the long-term liabilities decreased and current liabilities increased. All other items are unaffected.

Answer 2

Answer:

Answer is given in the attachment.

Explanation: