Question

On July 1, 2017, Kamer's Trinkets borrowed $39,000 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. Activity Investing in Accounts Cash Increase, Notes Payable Decrease Statement(s) Balance Sheet only How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount item is negative, le, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Stockholders' Assets Liabilities Equity Revenues 39,000 Notes Payable 39,000

Answer 1

July. 1 Activity Financing Accounts Cash Increase, Note payable increase Statement(s) Balance sheet, cash flow statement Dec. 31 Activity Operating Accounts Interest expense increase, interest payable increase Statement(s) Income statement and Balance sheet Apr. 1 Activity Financing and operating activity Accounts Interest expense increase, interest payable decrease, cash decrease, note payable decrease Statement(s) Income statement and Balance sheet, cash flow statement

July. 1 Balance sheet Income statement Statement of cash Net income flows FA $39,000 Stockholders' Equity Revenue Expenses Liabilities Note payable Assets $ 39,000 Cash $39,000 Dec. 31 Interest expense = $39,000x8%x6/12=1,560 Balance sheet Assets = Liabilities Stockholders' Equity Interest payable $1,560 Retained earnings -1,560 Revenue Income statement Expenses Interest expense Statement = Net income of cash 1,560 1 -1,560 Apr. 1 Interest expense =$39,000x8%x4/12=1,040 Cash = $39,000+1,560+1,040 Balance sheet Assets Liabilities Cash $-41,600 Interest payable $-1,560 Note payable -39,000 Revenue Stockholders' Equity Retained earnings -1,040| Income statement Expenses Interest expense Statement = Net income of cash -1,040 OA -2,600 FA-39,000 1,040