SAM 3100 Online Spring 2017-2018 Atty Nue 1 1123/18 10:00 PM Homework: Chapter 2
ID: 2607020 • Letter: S
Question
SAM 3100 Online Spring 2017-2018 Atty Nue 1 1123/18 10:00 PM Homework: Chapter 2 Homework core: 0 of 1 pt P2-4 (similar to) HW Score: 15.22%3.5 of 23 onslin Help how mach Aso indicalo the change to Globars book walue of eqt a Global usned 520 6 mo ol ts available cash to repay $20 6 miltion of ts long om debi c. Giobal used S4 7 millon in cash and 35 1 mllion in new long lerm det to purchane a $0 8 mon buking d. A large cuntoener owing $2 9 milion for products t already cevod docarod nkcy aving o possbilly that Glotal would ver oove paynent t. A key competitior announces a radcal ow pricing policy that will draefcally undeect Cblsprcs A. Long lerm abilitiers would decease by $20 6 mailion and csh wouild increanse by the sae ourt The book valu of oquity wouid be unchaged woud increase by $20 6 miltion, and cesh would ncene by te same anount The book valu ofeuty wous te unchanged O D. Long term lsbities would decase by $206 mlion and cash would decease by the sae at The bookval of eqaty would be unchanged C. Long ml Click to sclect your arswor and then click Chock Answer 5pe,nar.r.1Explanation / Answer
a)correct option is "D"
Payment of long term liability will decrease the amount by $20.60 at the same time ,cash will decrease by same amount .However equity will remain unaffected.
Entry :
Long term liability Debit 20.6
Cash credit 20.60
In the given entry,The account affected is Liability and asset account ,so it means there is no effect on equity due to this transaction.Liability(long term debt) normally has credit balance so when it is paid it is debited .Also Asset(cash) normally has debit balance so when it is decreased it is credited.
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