**Scenario:**Franklin Company issued a $40,000 note to the Mercantile Bank on August 1, Year 1. The note carried a one-year term and a 12% rate of interest. How will the adjustment, dated December 31, Year 1, to record accrued interest expense impact the financial statements?**Multiple Choice Options:**1. Decrease assets and decrease retained earnings by $2,0002. Increase liabilities and decrease stockholders’ equity by $1,6003. Increase liabilities and decrease stockholders’ equity by $2,0004. Decrease stockholders’ equity and increase liabilities by $4,800**Explanation:**This question relates to the accounting treatment of accrued interest expenses on a note payable. Since the note was issued on August 1 and the interest rate is 12% annually, the interest for the period from August 1 to December 31 (5 months) needs to be calculated and recorded. The appropriate treatment involves recognizing the accrued interest as an increase in liabilities and a decrease in equity, reflecting the expense incurred.

Franklin Company issued a $40,000 note to the Mercantile Bank on August 1, Year 1. The note carried a one-year term and a 12% rate of interest. How will the adjustment, dated December 31, Year 1, to record accrued interest expense impact the financial statements? Multiple Choice Decrease assets and decrease retained earnings by $2,000 Increase liabilities and decrease stockholders' equity by $1,600 Increase liabilities and decrease stockholders' equity by $2,000 Decrease stockholders' equity and increase liabilities by $4,800

Franklin Company issued a $40,000 note to the Mercantile Bank on August 1, Year 1. The note carried a one-year term and a 12% rate of interest. How will the adjustment, dated December 31, Year 1, to record accrued interest expense impact the financial statements? Multiple Choice Decrease assets and decrease retained earnings by $2,000 Increase liabilities and decrease stockholders' equity by $1,600 Increase liabilities and decrease stockholders' equity by $2,000 Decrease stockholders' equity and increase liabilities by $4,800

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On November 16, Bell borrowed $10,000 from Graham and gave a 90-day, 12% note. On December 31, the end of the accounting period, Graham would record: Select one: a. An increase to Notes receivable of $150 b. An increase to Interest receivable of $300 c. An increase to Cash of $150 d. An increase to Interest receivable of $150 e. None of the above
The accounts of Long Company provided the following 20X5 information at 31 December 20X5 (end of the annual period): Accounts receivable balance, 1 January 20X5 $51,000 Allowance for doubtful accounts balance, 1 January 20X5 3,000 Uncollectible account to be written off during 20X5 (ex-customer Slo) 1,000 Cash collected on accounts receivable during 20X5 170,000 Estimates for bad debt losses: Based on ending balance of accounts receivable, 8%. Based on aging schedule (excludes Slo’s account): Age Accounts Receivable Probability of Noncollection Less than 30 days $28,000 2% 31–90 days 7,000 10 91–120 days 3,000 30 More than 120 days 2,000 60 Required: Give the entry to write off customer Slo’s long-overdue account. Give all entries related to accounts receivable and the allowance account for the following two cases: Case A—Bad debt expense is based on the ending balance of accounts receivable Case B—Bad debt expense is based on aging Show how the results of applying each case above…
Gray Inc. lends White Ltd. $60,000 on April 1, accepting a 6-month, 4.5% interest note. Interest is due the first of each month, commencing May 1. Gray Inc. has an April 30 year-end. What adjusting entry should be made before the financial statements can be prepared? Cash 225 Interest Revenue. 225 Note Receivable. Cash. 60,000 60,000 Interest Receivable. Interest Revenue. 1,350 1350 Interest Receivable.. Interest Revenue. 225 225
Company I had the following balances at the end of the year: Accounts receivable: $50,000 Allowance for doubtful accounts: $2,000 (credit balance) The company estimates that 2% of accounts receivable will be uncollectible. Record the journal entry to adjust the allowance for doubtful accounts.
At the start of the current year, a company issued a $1,000,000 note to a bank. The company must pay the bank $200,000 plus interest each January 1 for the next five years starting at the beginning of next year. The company will report the note payable on its current year's balance sheet as O Current liabilities, $500,000; Long-term Debt, $500,000,0 Current liabilities, $200,000; Long-term Debt, $800,000. O Current liabilities, $800,000; Long term Debt, $200,000. 4 O Current liabilities, $1,000,000. O Long-term debt, $1,000,000.
Tyrell Company entered into the following transactions involving short-term liabilities. Year 1 April 20 Purchased $37,500 of merchandise on credit from Locust, terms n/30. May 19 Replaced the April 20 account payable to Locust with a 90-day, 8 %, $35,000 note payable along with paying $2,500 in cash. July 8 Borrowed $57,000 cash from NBR Bank by signing a 120-day, 11%, $57,000 note payable. _?Paid the amount due on the note to Locust at the maturity date. Paid the amount due on the note to NBR Bank at the maturity date. November 28 Borrowed $24,000 cash from Fargo Bank by signing a 60-day, 9%, $24,000 note payable. December 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. Year 2 _?_ Paid the amount due on the note to Fargo Bank at the maturity date. 5. Prepare journal entries for all the preceding transactions and events. Note: Do not round your intermediate calculations. View transaction list < Journal entry worksheet 1 2 3 4 5 6 7 8 Purchased $37,500 of…
12/31/2020: During 2020, $10,000 in accounts receivable were written off. At the end of the second year of operations, Yolandi Company had $1,000,000 in sales and accounts receivable of $400,000. XYZ’s management has estimated that $17,000 in accounts receivable would be uncollectible. For the end of 2020, after the adjusting entry for bad debts was journalized, what is the balance in the following accounts: Bad debt expense: Allowance for doubtful accounts: For the end of 2020, what is the company's net realizable value?
12/31/2020: During 2020, $10,000 in accounts receivable were written off. At the end of the second year of operations, Yolandi Company had $1,000,000 in sales and accounts receivable of $400,000. Yolandi’s management has estimated that $17,000 in accounts receivable would be uncollectible. Bad debt expense Allowance for doubtful accounts For the end of 2020, what is the company’s net realizable value?
Please solve all the MCQ with detailed answer for both correct and incorrect answers
Muscat Company borrowed OMR100,000 from the bank signing a 12 %, 3-month note on January 1. the adjusting entry that the company should make for interest on March 31, would be Select one: O a. None of the answers are correct O b. Debit Cash, OMR 3,000; Credit Interest Payable, OMR 3,000. O c. Debit Note Payable, OMR 3,000; Credit Cash, OMR 3,000. d. Debit Interest Expense, OMR 3,000; Credit Interest Payable, OMR 3,000. O e. Debit Interest Expense, OMR 12,000; Credit Interest Payable, OMR 12,000.
Subject: accounting
Monty Corp. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31. Nov. 1 Dec. 11 16 31 Loaned $77,000 cash to C. Bohr on a 12-month, 12% note. Sold goods to K. R. Pine, Inc., receiving a $3,300, 90-day, 6% note. Received a $12,000, 180-day, 7% note to settle an open account from A. Murdock. Accrued interest revenue on all notes receivable. Journalize the transactions for Monty Corp. (Omit cost of goods sold entries.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Use 360 days for calculation. Round intermediate calculations to 5 decimal places, e.g. 15.25127 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit credit