On January 1, Year 1, Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following correctly shows the effect of the issuance of the note on Platte's financial statements? Assets = Liabilities + n/a n/a (5,000) 5,000 A. 5,000 B. 5,000 C. (5,000) D. 5,000 Multiple Choice OOOO Option A Option B Option D Balance Sheet Option C Stockholders' Equity 5,000 5,000 n/a n/a Revenue 5,000 5,000 n/a n/a Income Statement Expense n/a n/a n/a n/a = Net Income 5,000 5,000 n/a n/a Statement of Cash Flows 5,000 FA 5,000 IA (5,000) IA 5,000 FA

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On January 1, Year 1, Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal.

Which of the following correctly shows the effect of the issuance of the note on Platte's financial statements?

**Balance Sheet and Income Statement Table:**

|                    | Balance Sheet                           | Income Statement              | Statement of Cash Flows |
|--------------------|----------------------------------------|-----------------------------|-------------------------|
|                    | Assets   = Liabilities + Equity       | Revenue – Expense = Net Income |                         |
| A.                 | 5,000    n/a           5,000          | 5,000   n/a       5,000      | 5,000 FA                |
| B.                 | 5,000    n/a           5,000          | 5,000   n/a       5,000      | 5,000 IA                |
| C.                 | (5,000)  (5,000)      n/a             | n/a     n/a       n/a        | (5,000) IA              |
| D.                 | 5,000    5,000        n/a             | n/a     n/a       n/a        | 5,000 FA                |

**Options:**

- Option A
- Option B
- Option D
- Option C

**Explanation:**
- The table is designed to analyze how different accounting treatments reflect the issuance of the note payable across different financial statements, including the balance sheet, income statement, and cash flow statement.
- The letters 'FA' and 'IA' denote financing activities and investing activities, respectively, in the statement of cash flows.
- Each option provides a different combination of changes to assets, liabilities, equity, and other financial statement components.
Transcribed Image Text:On January 1, Year 1, Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following correctly shows the effect of the issuance of the note on Platte's financial statements? **Balance Sheet and Income Statement Table:** | | Balance Sheet | Income Statement | Statement of Cash Flows | |--------------------|----------------------------------------|-----------------------------|-------------------------| | | Assets = Liabilities + Equity | Revenue – Expense = Net Income | | | A. | 5,000 n/a 5,000 | 5,000 n/a 5,000 | 5,000 FA | | B. | 5,000 n/a 5,000 | 5,000 n/a 5,000 | 5,000 IA | | C. | (5,000) (5,000) n/a | n/a n/a n/a | (5,000) IA | | D. | 5,000 5,000 n/a | n/a n/a n/a | 5,000 FA | **Options:** - Option A - Option B - Option D - Option C **Explanation:** - The table is designed to analyze how different accounting treatments reflect the issuance of the note payable across different financial statements, including the balance sheet, income statement, and cash flow statement. - The letters 'FA' and 'IA' denote financing activities and investing activities, respectively, in the statement of cash flows. - Each option provides a different combination of changes to assets, liabilities, equity, and other financial statement components.
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