long term note payable $100,000 and promise to pay back the principal and 6% semi annual interest (that means 6% annual interest compounded semi annually) in 5 years on Jan 1 Year 6  Is there an incremental impact on Net Income from adj made at 12/31/ Year 1 Assume time interest is paid as of 1/1/Year 6? my answer is B  A. Yes the adj will have a positive impact on NI B. Yes the adj will have a negative impact on NI C. No there isn't any adj made at 12/31/ year 1 D. No the adj made at 12/31/Year 1 results in the income stmt effect being cancelled out.  Is there any impact on working capital 12/31/Year 1? my answer is A A. No because there is no adj needed at 12/31/Year 1 B. Yes But it will increase working capital C. No the adj has no impact D. Yes it lowers working capital E. yes it increases working capital Thank you Brenda

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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long term note payable $100,000 and promise to pay back the principal and 6% semi annual interest (that means 6% annual interest compounded semi annually) in 5 years on Jan 1 Year 6 

Is there an incremental impact on Net Income from adj made at 12/31/

Year 1 Assume time interest is paid as of 1/1/Year 6?

my answer is B 

A. Yes the adj will have a positive impact on NI

B. Yes the adj will have a negative impact on NI

C. No there isn't any adj made at 12/31/ year 1

D. No the adj made at 12/31/Year 1 results in the income stmt effect being cancelled out. 

Is there any impact on working capital 12/31/Year 1?

my answer is A

A. No because there is no adj needed at 12/31/Year 1

B. Yes But it will increase working capital

C. No the adj has no impact

D. Yes it lowers working capital

E. yes it increases working capital

Thank you

Brenda

Expert Solution
Step 1

Notes payable: It is a long term liability to the organization issuing it. It is issued to raise debt to use it in the business operations of the organization. It is an agreement between the issuer and the holder to pay the interest on regular intervals and the principal amount on date of maturity of bonds.

Interest expense: It is the interest which is incurred by the organization on the bonds issued at regular intervals.

Net income: It is the income earned after deducting all the expenses incurred whether they are operating or non-operating from the revenues earned by a company.

Working capital: It is the excess of current assets over the current liabilities of a company. It is calculated by deducing the current liabilities from the current assets.

 

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