HELP!!!! on the effects of transactions on the accounting equation?
Assets= Current liabilities + long term liabilities + shareholders’ equity
Net income= Revenue – expenses
1-Made an adjusting entry to record interest on a short term note payable.
2-Made a monthly installment payment of a fully amortizing,six-month, interest-bearing installment note payable.
3-Entered into a contractual commitment with a television network to purchase sixty 30-second commercials to be aired in each of the next 18 months. The cost is ,000 per month, payable on the last day of the month in which the commercial aired.
4-Came within 12 months of the maturity date of a note payable originally issued for a period of 18 months.
5-Made an adjusting entry to accrue the monthly interest payable on a long-term mortgage.
6-Estimated the income taxes expense relating to the month’s business income.
Indicate the effects on the accounting equations using I for increase, D for decrease and NE for no effect.
Thx in advanced!!
*****Indicate the effects***** on the accounting equations using I for increase, D for decrease and NE for no effect.
It’s either I, D or NE for the balance sheet and income statement……….
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2 comments
Sandy on July 19, 2009 at 8:52 pm
1-Made an adjusting entry to record interest on a short term note payable
Expense (I); Current liability (I); Shareholders’ Equity (D); NE for everything else
2-Made a monthly installment payment of a fully amortizing,six-month, interest-bearing installment note payable
Expense (I); Curr. liab. (D); SE (D); Current asset (D); NE for everything else
3-Entered into a contractual commitment with a television network to purchase sixty 30-second commercials to be aired in each of the next 18 months. The cost is $75,000 per month, payable on the last day of the month in which the commercial aired
Curr. asset (I); Curr. liab. (I); L-T liab. (I); NE for everything else
4-Came within 12 months of the maturity date of a note payable originally issued for a period of 18 months.
Curr. liab (I); L-T liab. (D); NE for everything else
5-Made an adjusting entry to accrue the monthly interest payable on a long-term mortgage
Expense (I); Curr. liab. (I), SE (D); NE for everything else
6-Estimated the income taxes expense relating to the month’s business income
Expense (I); Curr. liab. (I); SE (D); NE for everything else
justwondering on July 19, 2009 at 8:52 pm
1 – expense
2 – Current liab + expense (you original entered the note amt of note only with interest to be recorded monthly? – you would now be paying a portion of the note along with the interest.)
3- This is a contract and you are liable – just like a lease – for the entire amount even if you go out of business, so it is a long term liability that you expense monthly ($75K) reducing the liab by that same amount.
4 – I don’t understand "came within". You could move it from long term to short term, but it is still a liab. Only the interest you paid would be an expense – principle amount post against the liab.
5 – $ to expense with the same amount posted to acct. payable. The mortgage amount is not touched – you are only noting current expense.
6 – How much income? Less your tax bracket = how much you will owe. You can post as expense offset in acct payable.