QUESTION 44 On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10% are to be made every December 31, beginning with December 2020. The present value of the note payments is $135,180. Required: Indicate the effect of the following on the company's accounting equation. Indicate each account title affected and the dollar change and whether it increased or decreased. To record the acquisition of equipment on January 1, 2020. O Increased the asset cash and liability note payable for $135,180. O Increased the asset equipment and liability note payable for $135,180. O Increased the asset cash and liability note payable for $220,000. O Increased the asset leased equipment and liability lease liability for $220,000.

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Chapter1: Financial Statements And Business Decisions
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QUESTION 44
On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10%
are to be made every December 31, beginning with December 2020. The present value of the note payments is $135,180.
Required:
Indicate the effect of the following on the company's accounting equation. Indicate each account title affected and the dollar change and whether it increased or
decreased.
To record the acquisition of equipment on January 1, 2020.
Increased the asset cash and liability note payable for $135,180.
O Increased the asset equipment and liability note payable for $135,180.
Increased the asset cash and liability note payable for $220,000.
O Increased the asset leased equipment and liability lease liability for $220,000.
QUESTION 45
On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10%
are to be made every December 31, beginning with December 2020. The present value of the minimum lease payments is $135,180.
Required:
Indicate the effect of the following on the company's accounting equation. Indicate each account title affected and the dollar change and whether it increased or
decreased.
To record the first note payment on December 31, 2020.
Increase interest expense $22,000, thereby decreasing net income, retained earnings, and cash for $22,0000.
O Increase interest expense $13,500, thereby decreasing net income and retained earnings for $13,500. Decrease cash $22,000 and note payable $8,500.
Increase interest expense $13,518, thereby decreasing net income, retained earnings, and cash for $13,518.
Increase interest expense $13,518, thereby decreasing net income and retained earnings for $13,518. Decrease cash $22,000 and note payable $8,482.
Transcribed Image Text:QUESTION 44 On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10% are to be made every December 31, beginning with December 2020. The present value of the note payments is $135,180. Required: Indicate the effect of the following on the company's accounting equation. Indicate each account title affected and the dollar change and whether it increased or decreased. To record the acquisition of equipment on January 1, 2020. Increased the asset cash and liability note payable for $135,180. O Increased the asset equipment and liability note payable for $135,180. Increased the asset cash and liability note payable for $220,000. O Increased the asset leased equipment and liability lease liability for $220,000. QUESTION 45 On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10% are to be made every December 31, beginning with December 2020. The present value of the minimum lease payments is $135,180. Required: Indicate the effect of the following on the company's accounting equation. Indicate each account title affected and the dollar change and whether it increased or decreased. To record the first note payment on December 31, 2020. Increase interest expense $22,000, thereby decreasing net income, retained earnings, and cash for $22,0000. O Increase interest expense $13,500, thereby decreasing net income and retained earnings for $13,500. Decrease cash $22,000 and note payable $8,500. Increase interest expense $13,518, thereby decreasing net income, retained earnings, and cash for $13,518. Increase interest expense $13,518, thereby decreasing net income and retained earnings for $13,518. Decrease cash $22,000 and note payable $8,482.
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