Points: 114 points totsl Vu wll have 120 mirs t Question ules O, May 1, 2020, Rw
ID: 2393450 • Letter: P
Question
Points: 114 points totsl Vu wll have 120 mirs t Question ules O, May 1, 2020, Rw Ca issues $350,000, 7%, 6-year bonds at 107. These bonds pay tenet w larru by onsch Other 31st und April 30th, and Fox will use effective interest amortiration. Which of the following represents how Fot's fnancial statements change based on Far's 1st seni-annual entry to acenue Intorest on October 31, 20202 (to be paid neut month? O Assets No Effect/ Liabilities Decrease / SE: Decreace / Nl: Decrease O Assets Decrease/ Liabilties: No Effect / SE: No Eflect /NI: No Effect O Assets No Efflect/ Lisbilities Increase / SE: Decrease /NI: Decrease Assets No Effect /Liabilities: increase/SE: No Effect /NI: Decrease D Question 2 3 pts On 1/1/16 Fox Co. bought equipment for $300,000 with an estimated useful life of 10 years and no salvage value. Fox incorrectlyExplanation / Answer
Solution 1:
On first semi annual entry to accrue Interest on October 31, 2020, Interest Expenses will decrese the net income and also the Stockholders equity correspondingly and Interest Payable will Increase the Liabilities.
Hence 3rd option "Asset:No Effect / Liabilities: Increase/ SE: Decrease/ NI: Decrease" is correct.
Solution :
Cash provided From Operating Activities = Net Income + depreciation of Equipment + Amortization of Patents
$600,000 = Net Income + $200,000 + $50,000
Net Income = $600,000 - $250,000 = $350,000