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Question(s) / Instruction(s):

Pat Waverly started a moving company on January 1, 2011. On March 1, 2011, Waverly borrowed cash from a local bank by issuing a one-year $45,300 face value note with annual interest based on an 11% percent discount. During 2011, Waverly provided services for $34,750 cash.

Required:

Answer the following questions. Record the events in T-accounts, prior to answering the questions.

(a)          What is the amount of total liabilities on the December 31, 2011, balance sheet?

(b)          What is the amount of net income on the 2011 income statement?

(c)           What is the amount of cash flow from operating activities on the 2011 statement of cash flows?

(d)          Provide the general journal entries necessary to record issuing the note on March 1, 2011; recognizing accrued interest on December 31, 2011; and repaying the loan on February 28, 2012.

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