Question: Notes Payable A business issued a 90-day, 7% note for $30,000 to a creditor on account. Illustrate the effects on the accounts and financial statements
Notes Payable
A business issued a 90-day, 7% note for $30,000 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
Statement of Cash Flows
Income Statement
No effect
No effect
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.
Statement of Cash Flows
Balance Sheet
Income Statement
Assets
=
Liabilities
+
Stockholders' Equity
Cash
=
Notes payable
+
Retained earnings
Statement of Cash Flows
Income Statement
Operating
Interest expense
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