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On January 1, Year 1, Echols Company borrowed $100,000 cash from Sun Bank by issuing a 5-year, 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan equals $25,045.65.

-Which of the following shows how the borrowing of cash from Sun Bank on January 1,Year 1,affects the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question

[The following information applies to the questions displayed below.]

On January 1, Year 1, Echols Company borrowed $100,000 cash from Sun Bank by issuing a 5-year, 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan equals $25,045.65.

-Which of the following shows how the borrowing of cash from Sun Bank on January 1,Year 1,affects the elements of the financial statements?

A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

Borrowing cash from Sun Bank will increase assets (cash)and liabilities (installment note payable)on the balance sheet.It has no effect on the income statement.On the statement of cash flows,it is a cash inflow from financing activities.

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