complete 3 below

Notes Payable and Interest

On July 1, 2017, Kamer’s Trinkets borrowed $38,000 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
Financing

Accounts
Cash Increase, Notes Payable Increase

Statement(s)
Balance Sheet only

Feedback

How does this entry affect the accounting equation?
If a financial statement item is not affected, select “No Entry” and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance SheetIncome Statement
Stockholders’Net
Assets=Liabilities+EquityRevenuesExpenses=Income

Cash





Notes Payable








No Entry





No Entry







Feedback

Correct

2. Identify and analyze the effect of any adjustments needed at year-end.

Activity
Operating

Accounts
Interest Payable Increase, Interest Expense Increase

Statement(s)
Balance Sheet and Income Statement

Feedback

How does this entry affect the accounting equation?
If a financial statement item is not affected, select “No Entry” and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Use months in calculation. Do not round intermediate calculations. If required, round your final answer to the nearest dollar.

Balance SheetIncome Statement
Stockholders’Net
Assets=Liabilities+EquityRevenuesExpenses=Income

No Entry





Interest Payable








No Entry





Interest Expense







Feedback

3. Identify and analyze the effect of the payment of principal and interest.

Activity
Financing

Accounts
Cash Decrease, Notes Payable Decrease, Interest Payable Decrease, Interest Expense Increase

Statement(s)
Balance Sheet and Income Statement

Feedback

How does this entry affect the accounting equation?
If a financial statement item is not affected, select “No Entry” and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Use months in calculation. Do not round intermediate calculations. If required, round your final answer to the nearest dollar.

Balance SheetIncome Statement
Stockholders’Net
Assets=Liabilities+EquityRevenuesExpenses=Income

Cash





Notes Payable








No Entry





Interest Expense








No Entry





Interest Payable








No Entry





No Entry






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