Mark's on the Park (MOP) is a highly successful restaurant known for their weekend brunch. Given the success of the restaurant, one
of Mark's friends, Mr. Lowe, asked for some financial help to open a similar restaurant in a nearby town. The following events relate to
the loan from MOP to Mr. Lowe:
1. On March 1, Year 1, MOP loaned Mr. Lowe $60,000 for one year at 5 percent interest.
2. On December 31, Year 1, MOP recognized accrued interest on the loan.
3. On March 1, Year 2, MOP recognized accrued interest.
4. On March 1, Year 2, MOP recognized the collection of the note including all interest.
Required:
Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of
cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify
the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). An example of a horizontal statements
model is shown below:
Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed.
Event
Number
Assets
Liabilities
+
Stockholders' Equity
Statement of Cash
Cash
Notes
Receivable
Interest
Receivable
Accounts
Payable
Common
Stock
Revenue
Retained
Earnings
Expenses
Net
Income
Flows
1.
(60,000)
60,000
+
+
(60,000) ΙΑ
2.
+
2,500
+
2,500
2,500
2,500
+
3.
+
500
+
500
500
+
4.
63,000
(60,000)
+
(3,000)
+
63,000 ΙΑ
Total
3,000
0
0
0
3,000
3,000
3,000
3,000 *NC
*NC = Net change in cash
