The following selected transactions were taken from the books ofRipley Company for Year 1:

1. On February 1, Year 1, borrowed $50,000 cash from the localbank. The note had a 8 percent interest rate and was due on June 1,Year 1.
2. Cash sales for the year amounted to $235,000 plus sales tax atthe rate of 7 percent.
3. Ripley provides a 90-day warranty on the merchandise sold. Thewarranty expense is estimated to be 3 percent of sales.
4. Paid the sales tax to the state sales tax agency on $195,000 ofthe sales.
5. Paid the note due on June 1 and the related interest.
6. On November 1, Year 1, borrowed $44,000 cash from the localbank. The note had a 7 percent interest rate and a one-year term tomaturity.
7. Paid $3,200 in warranty repairs.
8. A customer has filed a lawsuit against Ripley for $80,000 forbreach of contract. The company attorney does not believe the suithas merit.

Required
a. Answer the following questions:
1. What amount of cash did Ripley pay for interestduring Year 1?
2. What amount of interest expense is reported onRipley’s income statement for Year 1?
3. What is the amount of warranty expense for Year1?
b. Post the liabilities transactions to T-accountsand prepare the current liabilities section of the balance sheet atDecember 31, Year 1.
c. Show the effect of these transactions on thefinancial statements using a horizontal statements model like theone shown next. Use + for increase, ? for decrease, and NA for notaffected. In the Cash Flow column, indicate whether the item is anoperating activity (OA), investing activity (IA), or financingactivity (FA) or not affected (NA). The first transaction has beenrecorded as an example.