Indicate how each event affects the elements of the financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Increase = IDecrease = DNo Effect = NA(Note that "No Effect" means that the event either does not affect the element of the financial statements or that the event causes an increase in that element and is offset by a decrease in that same element.) On December 31, Year 1, Warren Co. recorded an adjusting entry to recognize accrued interest expense on a note payable.AssetsLiabilitiesStk. EquityRevenuesExpensesNetStmt. of ?IncomeCash Flows???????
What will be an ideal response?
(NA) (I) (D) (NA) (I) (D) (NA)
The year-end adjustment to accrue interest expense increases liabilities (interest payable) and decreases stockholders' equity (retained earnings). It increases expenses (interest expense), which decreases net income. It does not affect the statement of cash flows.
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Indicate whether the statement is true or false