QUESTION 46 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 second note payment on December 31, 2021. O Increase interest expense $13,518, thereby decreasing net income, retained earnings, and cash for $13,518. O Increase interest expense $22,000, thereby decreasing net income, retained earnings, and cash for $22,000. 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. O Increase interest expense $12,669.80, thereby decreasing net income and retained earnings for $12,669.80 Decrease cash $22,000 and note payable $9,330.20.
QUESTION 46 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 second note payment on December 31, 2021. O Increase interest expense $13,518, thereby decreasing net income, retained earnings, and cash for $13,518. O Increase interest expense $22,000, thereby decreasing net income, retained earnings, and cash for $22,000. 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. O Increase interest expense $12,669.80, thereby decreasing net income and retained earnings for $12,669.80 Decrease cash $22,000 and note payable $9,330.20.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.5AP
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning