Identify & analyze the effect of the payment of principal & interest

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Writing

Description

Notes Payable and Interest

On July 1, 2017, Kamer's Trinkets borrowed $38,000 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.

ActivityFinancing
AccountsCash Increase, Notes Payable Increase
Statement(s)Balance Sheet only

Feedback

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 RevenuesExpenses=Income
Cash Notes Payable No Entry No Entry

Feedback

Correct

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

ActivityOperating
AccountsInterest Payable Increase, Interest Expense Increase
Statement(s)Balance Sheet and Income Statement

Feedback

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 RevenuesExpenses=Income
No Entry Interest Payable No Entry Interest Expense

Feedback

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

ActivityFinancing
AccountsCash Decrease, Notes Payable Decrease, Interest Payable Decrease, Interest Expense Increase
Statement(s)Balance Sheet and Income Statement

Feedback

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 RevenuesExpenses=Income
Cash Notes Payable No Entry Interest Expense
No Entry Interest Payable No Entry No Entry


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