A business issued a 90-day, 6% note for $25,000 to a creditor on account. Illust

Question

A business issued a 90-day, 6% note for $25,000 to a creditor on account. Illustrate the effects on the accounts and financial statements of recording the issuance of the note and the payment of the note at maturity, including interest. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Illustrate the effects on the accounts and financial statements of recording the issuance of the note. Illustrate the effects on the accounts and financial statements of recording the payment of the note at maturity, including interest. Assume a 360-day year.

Explanation / Answer

Asset Labilities Stock holders Equity Cash Notes payable Retained earnings 25375 25000 375 (25000*6%*90/360) Statement of cashflow Income Statement operating 25000 Interest Exp 375

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