Notes Payable

A business issued a $90-$day, $7\%$ note for $$28,000$ to a creditor on account. 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.

Statement of Cash Flows Balance Sheet Income Statement

Assets $=$ Liabilities $+$ Stockholders' Equity

No effect

$=$

Accounts payable

$+$

Notes payable

$+$

No effect

fill in the blank $5$

$0$

fill in the blank $6$

$-28,000$

fill in the blank $7$

$28,000$

fill in the blank $8$

$0$

Statement of Cash Flows Income Statement

No effect

fill in the blank $10$

$0$

No effect

fill in the blank $12$

$0$

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.

Statement of Cash Flows Balance Sheet Income Statement

Assets $=$ Liabilities $+$ Stockholders' Equity

Cash

$=$

Notes payable

$+$

Retained earnings

fill in the blank $16$

fill in the blank $17$

$-28,000$

fill in the blank $18$

Statement of Cash Flows Income Statement

Operating

fill in the blank $20$

Interest expense

fill in the blank $22$

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