Question

The following statements are financial transactions completed by Carver Industries. Identify which financial statement accounts are affected by the transactions.
1. Carver owes one of Its suppliers $120,000 on account for past purchases. Carver sent this supplier $50,000 to pay down the account.
2. Carver has $200,000 of long-term bonds outstanding that pay investors 8% annual interest at the end of the year. Carver has Just made this payment to bond investors.
3. Carver paid $1,500 to the utility company to cover this month's electric bill.
4. Carver issued new long-term bonds at their par value of $300,000 to fund a new Investment project.
5. Carver closed a large sale to a major customer for $200,000, though the Inventory was only valued at $140,000 on the company's balance sheet. The customer paid $70,000 upfront and has agreed to pay the rest of the bill in the next month.

Answer 1

Answer: See explanation

Explanation:

1. Carver owes one of Its suppliers $120,000 on account for past purchases. Carver sent this supplier $50,000 to pay down the account.

In this case, the account payable will have to be reduced by $50000.

Cash will also decrease by $50000.

2. Carver has $200,000 of long-term bonds outstanding that pay investors 8% annual interest at the end of the year. Carver has Just made this payment to bond investors.

In this case, the interest expnese will increase by := 8% × 200,000

= 0.2 × $200,000

= $16000

Also, the cash will as well decrease by $16000.

3. Carver paid $1,500 to the utility company to cover this month's electric bill.

The operating expenses will have to increase by $1500 while cash will decrease by $1500.

4. Carver issued new long-term bonds at their par value of $300,000 to fund a new Investment project.

There'll be an increase of $300,000 in the long term liabilities. Cash will also increase by $300,000

5. Carver closed a large sale to a major customer for $200,000, though the Inventory was only valued at $140,000 on the company's balance sheet. The customer paid $70,000 upfront and has agreed to pay the rest of the bill in the next month.

In this case, there'll be an increase in the sales revenue by $200000.

Increase in cash by $70000

Increase in the account receivable by $130000

Decrease in the inventory by $140000

Increase in the cost of goods that are sold by $140000.