Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Enter only one letter for each element.Increase = IDecrease = DNo Effect = NOn December 31, Year 1, Flagler Corporation had a balance of $20,000 on a line-of-credit with City Bank. Flagler made a payment of $11,200, which included $10,000 on the principal and $1,200 interest. Show the effects of this transaction on Flagler's financial statements.AssetsLiabilitiesEquityRevenuesExpensesNetIncomeCash Flow? ?????
What will be an ideal response?
(D) (D) (D) (N) (I) (D) (D)
Making a payment on a line of credit decreases assets (cash) for the amount of the payment and decreases liabilities (line of credit liability) for the amount of the principal payment. It increases expenses (interest expense) for the amount of the interest payment, which decreases net income and equity. The principal reduction is reported as a cash outflow for financing activities and the interest payment is reported as a cash outflow for operating activities on the statement of cash flows.
You might also like to view...
A $140 petty cash fund has cash of $18 and receipts of $120. The journal entry to replenish the account would include a credit to
A) Cash for $120. B) Cash Over and Short for $2. C) Petty Cash for $122. D) Cash for $122.
The higher a person moves up the corporate ladder, the less likely he or she is to give oral presentations
Indicate whether the statement is true or false
A line of credit is an agreement that allows a company to borrow a set amount of money for a period of one year or more.
Answer the following statement true (T) or false (F)
The Clean Water Act permits the filling or dredging of wetlandswithout a permit
Indicate whether the statement is true or false