**Transcription for Educational Website****Scenario:**On October 1, Year 1, Hernandez Company loaned $60,000 cash to Acosta Company. The one-year note carried a 6% rate of interest. Determine how the December 31, Year 1, recognition of accrued interest will affect Hernandez’s financial statements.**Financial Data Analysis:**The table below illustrates various scenarios of how the recognition might impact the financial statements:| Option | Balance Sheet | Income Statement | Statement of Cash Flows ||--------|---------------|------------------------------|--------------------------|| | Assets = Liabilities + Stockholders’ Equity | Revenue – Expense = Net Income | || A | 900 = NA + 900 | 900 – NA = 900 | 900 IA || B | 900 = NA + 900 | 900 – NA = 900 | NA || C | 2,700 = NA + 2,700| 2,700 – NA = 2,700 | 2,700 IA || D | 2,700 = NA + 2,700| 2,700 – NA = 2,700 | NA |**Multiple Choice Options:**- Option A- Option C- Option D- Option B**Explanation of Financial Data:**- **Assets, Liabilities, and Stockholders’ Equity**: Represents how the assets are balanced with liabilities and equity after interest accrual.- **Income Statement**: Shows the calculated net income based on accrued revenue and expenses.- **Statement of Cash Flows**: Indicates how cash is impacted, listed as "IA" (meaning Interest Accrued, if applicable).This table is used to identify the correct option reflecting the financial change from recognizing accrued interest on December 31, Year 1.

Journal entries for accrued interest income: Interest receivable account is debited and Interest…

On October 1, Year 1 Hernandez Company loaned $60,000 cash to Acosta Company. The one-year note carried a 6% rate of interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will affect Hernandez's financial statements? Assets A. 900 B. 900 C. 2,700 D. 2,700 Multiple Choice Balance Sheet Liabilities + ΝΑ OOO O Option A Option C Option D Option B ΝΑ ΝΑ ΝΑ Stockholders' Equity 900 900 2,700 2,700 Income Statement Revenue 900 900 2,700 2,700 Net Expense = Income ΝΑ 900 900 2,700 2,700 NA ΝΑ NA Statement of Cash Flows 900 IA ΝΑ 2,700 IA NA

On October 1, Year 1 Hernandez Company loaned $60,000 cash to Acosta Company. The one-year note carried a 6% rate of interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will affect Hernandez's financial statements? Assets A. 900 B. 900 C. 2,700 D. 2,700 Multiple Choice Balance Sheet Liabilities + ΝΑ OOO O Option A Option C Option D Option B ΝΑ ΝΑ ΝΑ Stockholders' Equity 900 900 2,700 2,700 Income Statement Revenue 900 900 2,700 2,700 Net Expense = Income ΝΑ 900 900 2,700 2,700 NA ΝΑ NA Statement of Cash Flows 900 IA ΝΑ 2,700 IA NA

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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