Notes Payable and Interest

On July 1, 2017, Kamer's Trinkets borrowed $22,000 from the bank. Kamer signed a ten-month, 8% promissory note for the entire amount. Kamer's uses a calendar year-end.

Required:

1. Identify and analyze the effect of the issuance of the promissory note.

Activity
Accounts
Statement(s)

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Cash

2. Identify and analyze the effect of any adjustments needed at year-end.

Activity
Accounts
Statement(s)

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Use months in calculation. Do not round intermediate calculations. If required, round your final answer to the nearest dollar.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

3. Identify and analyze the effect of the payment of principal and interest.

Activity
Accounts
Statement(s)

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Use months in calculation. Do not round intermediate calculations. If required, round your final answer to the nearest dollar.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income