Question

On July 1, 2019, Goode Company borrowed $150,000. The company signed a note payable with interest at 8 percent per year. The note and interest are due on December 31, 2019. On December 31, 2019, Goode paid $156,000 to settle the debt in full. Assuming no accruals for interest have been made during the year, transaction analysis of the $156,000 cash payment on December 31, 2019 should reflect which of the following?

Multiple Choice

• A decrease in stockholders' equity of $150,000, a decrease in liabilities of $6,000, and a decrease in assets of $156,000.

• A decrease in assets of $150,000, a decrease in stockholders' equity of $6,000, and a decrease in liabilities of $156,000.

• A decrease in liabilities of $150,000, a decrease in stockholders' equity of $6,000, and a decrease in assets of $156,000.

• A decrease in assets of $156,000 and a decrease in liabilities of $156,000.

Answer 1

Answer
The option C is Correct : A decrease in liabilities of $150,000, a decrease in stockholders' equity of $6,000, and a decrease in assets of $156,000.
Explanation
Entry
Dec-31	Note payable a/c	$150,000		reduces liability
	Interest expense a/c 150000*8%*1/2	6,000		reduces stockholders equity
	............To cash a/c		$156,000	reduces assets.

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