Question

The company borrowed using a note payable from the bank for $30,000 on January 1 of the current vear, due with all interest on June 30 of the following year. The note payable requires 10% interest Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits - credits. Assets Liabilities Stockholders' Equity (h) The company calculated its income taxes as $26.110 for the current year ended December 31. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits -credits. Assets Liabilities Stockholders' Equity () On December 15 of the current year, the company declared a $750 dividend, payable January 15 of the following year. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits credits

Answer 1

Ans : (g) .

Date. Particulars. Debit. Credit

Dec 31. Cash . $ 30,000

Notes payable. $30,000

( To record Bank loan)

Dec 31 . Interest expenses $ 3,000

Interest payable. $ 3,000

( 10% interest payable on loan)

Equation : Assets = Liabilities + Stockholders equity

1. Increase in cash of $ 30,000 will increase asset side by $ 30,000

2. Notes payable will increase liability side by 30,000

3. Interest expense will reduce retained earnings (which is a part of stockholders equity ) by $ 3,000

4. Interest payable will increase liability side by $ 3,000

So, after these effects :

Assets = liabilities + stockholders equity

(h). Date Particulars . Debit. Credit

Dec 31 . Income tax expense . $ 26,110

Income tax payable . $ 26,110

( Being income tax liability

Of $ 26,110)

1. Income tax expense will decrease retained earnings(which is a part of stockholders equity)

2. And income tax tax payable will increase liability side.

So, after these effects :

Assets = liabilities + stockholders equity

(I) Date . Particulars . Debit Credit

Dec 31. Retained earnings. $ 750

Dividend payable. $ 750

( Being dividend declaration

of $ 750)

1. Retained earnings will decrease by dividend declaration .

2. Liability side will increase by dividend payable.

So, equation still balances, Debit = Credit

Assets = liabilities + stockholders equity