QUESTION 43 On January 1, 2020, Smith Company signed a ten year Note for the acquisition of equipment Annual note payments of $22,000, based on an interest rate of 10 are to be made every December 31, beginning with December 2020 The present value of the note payments is $135,180 Required Indicate the effect of the following on the companys accounting equation Indicate each account title affected and the dollar change and whether it increased or decreased To record the acquisition of equipment on January 1, 2020 Increased the asset leased equipment and liability lease liability for $220,000 Increased the asset equipment and liability note payable for $135,180 Increased the asset cash and liability note payable for $135,180 Increased the asset cash and liability note payable for $220,000 QUESTION 42 ABC, Inc issued $5,000,000 face value, 20 year, 12 bonds on March 1, 2020 when the market rate of interest was 12 Interest payments are due every February 28 and August 31 The company follows a calendar year Required Indicate the best answer for the effect of the following on the companys accounting equation Identify each account title affected and dollar change, and whether it increased or decreased The payment of interest on February 28, 2021 Increase interest payable and interest expense, thereby decreasing net income, retained earnings, and cash for 200,000 Increase interest expense $400,000, thereby decreasing net income and retained earnings for 400,000 Decrease cash $600,000 and interest payable $200,000 Increase interest expense $100,000, thereby decreasing net income and retained earnings for 100,000 Decrease cash $300,000 and interest payable $200,000 Increase interest expense $100,000, thereby decreasing net income and retained earnings for 100,000 Decrease cash $300,000 and increased interest payable $200,000 QUESTION 41 ABC, Inc issued $5,000,000 face value, 20 year, 12 bonds on March 1, 2020 when the market rate of interest was 12 Interest payments are due every February 28 and August 31 The company follows a calendar year Required Indicate the best answer for the effect of the following on the companys accounting equation Identify each account title affected and dollar change, and whether it increased or decreased The accrual of interest expense at December 31, 2020 Increase interest payable and interest expense, thereby decreasing net income and retained earnings for 200,000 Increase interest expense, thereby decreasing net income, retained earnings, and cash for 300,000 Increase interest payable and interest expense, thereby decreasing net income and retained earnings for 300,000 Increase interest expense, thereby decreasing net income, retained earnings, and cash for 200,000

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 19, 2024

QUESTION 43 On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an

QUESTION 43

On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10% are to be made every December 31, beginning with December 2020. The present value of the note payments is $135,180.

Required:

Indicate the effect of the following on the companys accounting equation. Indicate each account title affected and the dollar change and whether it increased or decreased.

To record the acquisition of equipment on January 1, 2020.

		Increased the asset leased equipment and liability lease liability for $220,000.
		Increased the asset equipment and liability note payable for $135,180.
		Increased the asset cash and liability note payable for $135,180.
		Increased the asset cash and liability note payable for $220,000.

QUESTION 42

ABC, Inc. issued $5,000,000 face value, 20-year, 12% bonds on March 1, 2020 when the market rate of interest was 12%. Interest payments are due every February 28 and August 31. The company follows a calendar year.

Required:

Indicate the best answer for the effect of the following on the companys accounting equation. Identify each account title affected and dollar change, and whether it increased or decreased.

The payment of interest on February 28, 2021.

		Increase interest payable and interest expense, thereby decreasing net income, retained earnings, and cash for 200,000.
		Increase interest expense $400,000, thereby decreasing net income and retained earnings for 400,000. Decrease cash $600,000 and interest payable $200,000.
		Increase interest expense $100,000, thereby decreasing net income and retained earnings for 100,000. Decrease cash $300,000 and interest payable $200,000.
		Increase interest expense $100,000, thereby decreasing net income and retained earnings for 100,000. Decrease cash $300,000 and increased interest payable $200,000.

QUESTION 41

Required:

Indicate the best answer for the effect of the following on the companys accounting equation. Identify each account title affected and dollar change, and whether it increased or decreased.

The accrual of interest expense at December 31, 2020.

		Increase interest payable and interest expense, thereby decreasing net income and retained earnings for 200,000.
		Increase interest expense, thereby decreasing net income, retained earnings, and cash for 300,000.
		Increase interest payable and interest expense, thereby decreasing net income and retained earnings for 300,000.
		Increase interest expense, thereby decreasing net income, retained earnings, and cash for 200,000.