Effects of Transactions Upon Financial Measurements
Five Events Relating to Liabilities

question 122

Essay

Effects of transactions upon financial measurements
Five events relating to liabilities are described below:
(a) Recorded a bi-weekly payroll, including the issuance of paychecks to employees. Amounts withheld from employees' pay and payroll taxes will be forwarded to appropriate agencies in the near future. (Ignore postretirement costs.)
(b) Made a monthly payment on a 12-month installment note payable, including interest and a partial repayment of the principal amount.
(c) Shortly before the maturity date of a six-month bank loan, made arrangements with the bank to refinance the loan on a long-term basis.
(d) Made an adjusting entry to record accrued interest payable on a 2-year bank loan (interest is paid monthly.)
(e) Made a year-end adjusting entry to amortize a portion of the discount on long-term bonds payable.
Indicate the immediate effects of each transaction or adjusting entry upon the financial measurements in the five column headings listed below. Use the code letters, I for increase, D for decrease, and NE for no effect.
$$\begin{array} { | l | c | c | c | c | c | } \hline \text { Transaction } & \text { Current } & \text { Long-Term } & \text { Net } & \text { Net Cash Flow } & \text { (Other than } \\\hline & \text { Liabilities } & \text { Liabilities } & \text { Income } & \text { (All Activities } & \text { Operating } \\\hline & & & & \text { Combined) } & \text { Activities) } \\\hline \text { (a) } &\underline{\quad\quad} & \underline{\quad\quad}&\underline{\quad\quad} & \underline{\quad\quad}& \underline{\quad\quad} \\\hline \text { (b) } & \underline{\quad\quad} &\underline{\quad\quad}&\underline{\quad\quad}&\underline{\quad\quad}&\underline{\quad\quad} \\\hline \text { (c) } & \underline{\quad\quad}& \underline{\quad\quad} &\underline{\quad\quad} &\underline{\quad\quad} & \underline{\quad\quad} \\\hline \text { (d) } &\underline{\quad\quad} & \underline{\quad\quad}& \underline{\quad\quad}&\underline{\quad\quad} &\underline{\quad\quad} \\\hline \text { (e) } & \underline{\quad\quad}& \underline{\quad\quad}& \underline{\quad\quad}&\underline{\quad\quad} &\underline{\quad\quad} \\\hline\end{array}$$

Understand the concepts and characteristics of different types of mutual funds.

Identify the costs and fees associated with mutual funds, including loads, 12b-1 fees, and expense ratios.

Understand the calculation of net asset value (NAV) and how it affects mutual fund transactions.

Recognize the tax implications and potential tax liabilities associated with investing in mutual funds.

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Definitions:

Workflows

The sequence of processes through which a piece of work passes from initiation to completion in a business environment.

Strategic Objectives

Specific, measurable goals that organizations set to guide their strategic plans and actions toward achieving their broader missions and visions.

Process Reengineering

A management strategy focusing on the analysis and design of workflows and processes within an organization to dramatically improve performance.

Increasing Efficiency

The process of improving the ability to achieve a higher output with the same or fewer resources, often through the optimization of processes.