On July 1, 2016, Goode Company borrowed $180,000. The company signed a note paya
ID: 2392063 • Letter: O
Question
On July 1, 2016, Goode Company borrowed $180,000. The company signed a note payable with interest at 6 percent per year. The note and interest are due on December 31, 2016. On December 31, 2016, Goode paid $185,400 to settle the debt in full. Assuming no accruals for interest have been made during the year, transaction analysis of the $185,400 cash payment on December 31, 2016 should reflect which of the following?
a. A decrease in assets of $180,000, a decrease in stockholders' equity of $5,400, and a decrease in liabilities of $185,400.
b. A decrease in assets of $185,400 and a decrease in liabilities of $185,400.
c. A decrease in liabilities of $180,000, a decrease in stockholders' equity of $5,400 and a decrease in assets of $185,400.
d. A decrease in stockholders' equity of $180,000, a decrease in liabilities of $5,400, and a decrease in assets of $185,400.
Explanation / Answer
C.A decrease in liabilities of $180,000 , a decrease in stock holders equiry of $5400 and decrease in assets of $185,400.
the following will be the journal entry (along with effects on accounting equation):
dec 31 Note payable a/c $180,000 this reduces the liability Interest expense a/c 5,400 this reduces the stockholders equity ............To cash a/c $185,400 this reduces the assets.Related Questions
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