The following selected transactions were taken from the books ofRipley Company for 2018:
1.   On February 1, 2018, borrowed $70,000 cash from thelocal bank. The note had a 6 percent interest rate and was due onJune 1, 2018.
2.   Cash sales for the year amounted to $240,000 plussales tax at the rate of 7 percent.

3.   Ripley provides a 90-day warranty on themerchandise sold. The warranty expense is estimated to be 1 percentof sales.
4.   Paid the sales tax to the state sales tax agency on$210,000 of the sales.

5.   Paid the note due on June 1 and the relatedinterest.

6.   On November 1, 2018, borrowed $20,000 cash fromthe local bank. The note had a 6 percent in-
terest rate and a one-year term to maturity.

7.   Paid $2,100 in warranty repairs.

8.   A customer has filed a lawsuit against Ripley for$1 million for breach of contract. The company
attorney does not believe the suit has merit.
Required
a.   Answer the following questions:
(1) (2) (3)
What amount of cash did Ripley pay for interest during 2018?

What amount of interest expense is reported on Ripley’s incomestatement for 2018?

What is the amount of warranty expense for 2018?

b.   Prepare the current liabilities section of thebalance sheet at December 31, 2018.

c. Show the effect of these transactions on the financialstatements using a horizontal statements model like the one below.Use + for increase, ? for decrease, and NA for not affected. In theCash Flow column, indicate whether the item is an operatingactivity (OA), investing activity
(IA), or financing activity (FA).

a. (1)     Cash paid forinterest:       $. x % x /12=

     (2)     InterestExpense:    $            x   %x  /12 =     $

                                               $            x   %x  /12=                    

                                               TotalInterest Expense   $

     

     (3)     WarrantyExpense:  $                 x    %= $

b.

Interest Payable		Sales Tax Payable
6.1		2.2                                                                    4.3
Bal.		Bal.

¹$         x    %x    /12 =$                                       ²$              x     %= $

                                                                                   ³$              x      %= $

Warranty Payable		Notes Payable
3.4		1.
7.		5.
Bal.		6.
		Bal.

⁴$             x% = $

                                                                                   

Ripley Company
	Current Liabilities
		$
	Total Current Liabilities	$

Note:  Is there anything that should not berecorded and why?