Question
A business issued a 60-day, 9% note for $70,000 to a creditor for an accounts payable. Illustrate the effects on the accounts and financial statements
A business issued a 60-day, 9% note for $70,000 to a creditor for an accounts payable. Illustrate the effects on the accounts and financial statements of recording (a) the issuance of the note and (b) the payment of the note at maturity, including interest.
If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.
a. Illustrate the effects on the accounts and financial statements of recording the issuance of the note.
Balance Sheet | |||||||
Assets | = | Liabilities | + | Stockholders' Equity | |||
Account receivableCashNo effect | = | Accounts payableAccount receivableNo effect | + | CashNotes payableNo effect | + | Capital stockRetained earningsNo effect | |
fill in the blank 5 | fill in the blank 6 | fill in the blank 7 | fill in the blank 8 | ||||
Statement of Cash Flows | Income Statement | ||||||
FinancingInvestingOperatingNo effect | fill in the blank 10 | Cost of merchandise soldNet incomeSalesNo effect | fill in the blank 12 |
b. Illustrate the effects on the accounts and financial statements of recording the payment of the note at maturity, including interest. Assume a 360-day year. If required, round interest expense to the nearest whole number.
Balance Sheet | ||||||
Assets | = | Liabilities | + | Stockholders' Equity | ||
CashNotes payableNo effect | = | Accounts payableNotes payableNo effect | + | Capital stockRetained earningsNo effect | ||
fill in the blank 16 | fill in the blank 17 | fill in the blank 18 | ||||
Statement of Cash Flows | Income Statement | |||||
FinancingInvestingOperatingNo effect | fill in the blank 20 | Cost of merchandise soldInterest expenseSalesNo effect | fill in the blank 22 |
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