The note carries an interest a rate of 6 the loan

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Unformatted text preview: an, plus interest, is to be repaid on September 30, 20X2. repaid Assets = Assets - 10,000 (cash) 10,000 +10,000 (N/Rec) Liab. n/a + C. Stock + Ret. Earn. n/a n/a Income Statement: net income was not affected Statement of Changes in Equity: equity was not Statement affected affected Statement of Cash Flows: net cash flow decreased Accruing Interest at Year-end On Dec. 31, accrued interest on the October 1, Note Receivable. October Assets = Assets + 150 (I/Rec.) 150 Liab. n/a + C. Stock + Ret. Earn. n/a + 150 Income Statement: net income increased Statement of Changes in Equity: equity increased Statement Statement of Cash Flows: cash flow was not affected Repayment of the Note Rec. Repayment On Sept. 30, 20X2 the supplier repaid the On Note Receivable that was issued on Oct. 1, 20X1 Oct. Assets = Assets + 10,600 (cash) 10,600 - 10,000 (N/Rec.) 150 (I. Rec.) Liab. n/a + C. Stock + Ret. Earn. n/a + 450 Income Statement: net income increased by $450 Statement of Changes in Equity: equity increased Statement Statement of Cash Flows: net cash flow increased The Operating Cycle The Definition of the operating cycle The time required to go from cash back to cash CASH Accts. Rec. Inventory The shorter the operating cycle, the The better because of the “time-value of money.” money.” The “Classified” Balance Sheet The A classified balance sheet separates classified assets and liabilities into “current” vs. “noncurrent” accounts. “noncurrent” Definition of a current asset vs. noncurrent or long-term asset Definition of a current liability vs. noncurrent or long-term liability Importance of classifying items as Importance current or noncurrent current affect on ratios...
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